Nov 06 2008
0% credit cards heading towards extinction?
The golden words of ‘interest free borrowing’ may very soon be a thing of the past. The present credit crunch has made credit lender cautious and pragmatic in their approach and have made it clear that sooner or later this candy offer of credit being offered to customers at zero interest rate will cease to exist. Also facing the same apathy are companies which were providing zero interest on balance transfers where the customer could transfer his debt from one company to the other without having to pay any fee or charge. The zero interest rate applicable on certain credit cards mean that for a set time duration the amount due on the credit card will not garner any interest on it.
Working on this characteristic the credit card lenders and banks are working towards reducing this interest free time limit from the presently allowed 10.1 month period to 9.5 months. Also coming with these reductions are the implementation of strict lending conditions by lenders and financial institutions. This could effectively mean that it would now become very difficult for a customer to keep shifting his debt from one company to another as the new company may not find you as a good customer befitting their requirements.
Clear indications of banks and lenders moving towards scarring these zero interest deals can be got from the fact that many of such institutions have stopped advertising their balance transfer cards from many comparison websites on the internet clearing indicating their intent to withdraw from this segment. Strict and tight lending conditions have also been implemented with regards to the industrial credit demand. The overdraft limits have witnessed substantial cuts while the interest rates have moved up steadily. This is clearly indicating that borrowing across all verticals has become very difficult now and this situation does not seem to be improving in the near future too.