Introductory UK Credit Card Offers

Many new credit card offers in the UK now come with an attractive 0% introductory offer. This offer will encourage new customers to use their credit card for purchases that have no interest charges or charges for credit.

This is just one of many incentives that the credit card company will make to try and win your business. Essentially the company will hope that you still spend after the introductory period runs out, typically a 6 to 9 month period. You can find examples of 0% credit cards from another recommended credit card site through the link shown.

Usually with this 0% purchase offer there will also be a 0% balance transfer deal too, typically for the same period as the introductory purchase offer. 0% balance transfers are extremely popular at the moment with companies such as Virgin and Morgan Stanley leading the market as being the most popular deals out there. With Virgin there is a 0% balance transfer offer for 9 months, while Morgan Stanley offer a 0% period for 6 months on purchases and balance transfers. Both these companies try to target a different market, with Virgin offering points that can be spent in store, while Morgan Stanley offer up to 1% cash back on purchases.

With all these incentives to apply for these credit cards the customer may start to wonder why. Where does the credit card company actually make any profit? Do they expect us to stay with them when the introductory offers actually run out? Well these two questions are actually linked. The credit card supplier will realise that many of its’ applicants are only interested in saving money by transferring balances, receiving ‘free’ credit or trying to earn some rewards with the spending incentives that the companies will actually use. However, they also realise that some of their customers will actually remain with them after this period expires. By doing so the and if the customer does not use the credit card expect new and improved deals to be offered with new balance transfer offers of better purchase rates being proposed. One should note that if you are not using the credit card the supplier will use everything in their power to try and encourage you to do so, especially if you have a good credit rating.

Then you may ask the question why does the credit card supplier want you to use their credit card offer even if you pay the balance every month, pay no interest and claim the cash back or reward scheme incentives? Well that answer is relatively simple. Have you ever noticed signs posted in shops or garages that state that you must spend over £10 if you are to use a credit card? This is because the retail outlet will be charged for processing the credit card and making a payment to them. These charges vary from shop to shop but the bigger the store the smaller the charge will be for them, per transaction. Therefore in smaller shops this can be relatively high as there is little chance that this shop has the same turnover as the large retail store, bringing economies of scale into force.

However, does this really affect the end user? Well it may, if you have ever asked for a discount from a small shop and then tried to pay by credit card you may have a ‘polite’ refusal from the shop owner. This is generally not for tax reasons as many customers may think but because of the charges this will incur.

The other large money making area for the credit card company will be for people who pay later or too late. Interest accrued by people not paying their balance in full every month is at its all time highest level in the UK. This interest rate that is charged is almost identical to those with a chequered credit history, so it will be in your interests to pay this balance off every month or alternatively transfer your balance to a 0% balance transfer offer, which will save you a small fortune. The other major earner for credit card companies will be when people do not make any payment to the credit card bill and are then charged not only with the interest calculated for that month but also with a late payment charge. These will vary from £20 per month then of course the interest that is payable on this charge next month. When credit card debt hits it really can become a vicious circle that can be extremely difficult to escape from.