Credit card warning for 5 million rate tarts

Credit card customers whose zero per cent balance transfer deals have expired or are close to expiring face rising interest rates imposed by providers hoping to cash in on rate tarts, according to MoneyExpert.com.

The independent financial comparison website says some five million people switched credit card provider between April and October last year, meaning millions of zero per cent deals are now on the verge of expiring.

Since last summer the average standard APR on balance transfers has risen from 15.11 per cent in August 2007 to 16.49 per cent now. Last August just 19 cards charged interest of 18 per cent or higher on balance transfers but now that has since risen to 42, according to the website.

MoneyExpert.com says providers are tightening their lending criteria, making it harder for people with debts to get new lines of credit. The website is warning so-called rate tarts who are used to swapping credit cards for continuous interest-free credit that they will soon have little choice but to repay the money they owe or face rising repayments.

Sean Gardner, director of MoneyExpert.com, said: "Switching credit cards used to be commonplace and being a rate tart was seen as a sign of being savvy with your cash. But getting a credit card is much more difficult now.

"Unless you've paid off your debts you could be stung with very high interest rates on your remaining balance once your zero per cent deal ends.

"The days of the rate tart are numbered as the effects of the credit crunch filter into the credit card system. With balance transfer fees now the norm and with banks being much more stringent with who they lend to, most people will have to accept that having a credit card does not mean having free money. The number one rule is only borrow what you can afford to repay."

According to MoneyExpert.com someone with a credit card balance of £3,000 from a balance transfer will typically pay £494.70 a year in interest alone unless they pay back the money they owe. This is £41 more than at last year's lower typical APR.

Despite the rising interest rates MoneyExpert.com analysis also shows that the credit card market is getting more competitive. At the start of 2008 there were 105 cards offering 10 months interest free credit on balance transfers whereas that figures has since risen to 112 now.

Some 26 cards now offer 13 months zero per cent interest on balance transfers with Capital One, Virgin Money and Barclaycard offering the best deals.