Card purchase APR hits new high, 0% offers improve

Image of a Moneyfacts Unsecured Lending Treasury Report Image of a Moneyfacts Unsecured Lending Treasury Report Image of a Moneyfacts Unsecured Lending Treasury Report
Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
21/09/2021

Card purchase APR hits new high, 0% offers improve

Card purchase APR hits new high, 0% offers improve

Moneyfacts UK Unsecured Lending Trends Treasury Report, which studies the UK personal finance market (Credit Cards, Personal Loans and Overdrafts) reveals during Q3 2021 the average purchase credit card APR rose to a high of 26.0% APR and 0% offers were adjusted.

 

Moneyfacts UK Unsecured Lending Trends Treasury Report, which studies the UK personal finance market (Credit Cards, Personal Loans and Overdrafts) reveals during Q3 2021 the average purchase credit card APR rose to a high of 26.0% APR and 0% offers were adjusted.

 

  • Between the start of June and the end of August 2021 (Q3 2021), the average purchase APR (which includes card fees) rose to 26.0% APR, the highest seen on our records. A combination of changes attributed to this rise, including rate increases to some of the lowest rate cards, new card launches and some card withdrawals.
  • Interest-free purchase cards improved over the past quarter, now offering 316 days at 0% on average, up from 285 days in June. Terms have improved year-on-year from 280 days but have not quite returned to levels seen in September 2019 at 336 days.
  • The average interest-free balance transfer term on credit cards fell to 548 days, from 550 days in June. Terms are up year-on-year from 529 days.
  • Balance transfer fees have fallen to 2.10% on average, down from 2.28% a year ago, now the lowest recorded since June 2018 when it was 2.07%.
  • Between the start of June and the end of August 2021 (Q3 2021), the average purchase APR (which includes card fees) rose to 26.0% APR, the highest seen on our records. A combination of changes attributed to this rise, including rate increases to some of the lowest rate cards, new card launches and some card withdrawals.
  • Interest-free purchase cards improved over the past quarter, now offering 316 days at 0% on average, up from 285 days in June. Terms have improved year-on-year from 280 days but have not quite returned to levels seen in September 2019 at 336 days.
  • The average interest-free balance transfer term on credit cards fell to 548 days, from 550 days in June. Terms are up year-on-year from 529 days.
  • Balance transfer fees have fallen to 2.10% on average, down from 2.28% a year ago, now the lowest recorded since June 2018 when it was 2.07%.
Unsecured Lending Treasury Report Q3 cover Unsecured Lending Treasury Report Q3 cover Unsecured Lending Treasury Report Q3 cover

Credit card market analysis

 

Sep-19

Sep-20

Jun-21

Aug-21

Sep-21

Average purchase APR (includes fee)

24.7%

25.2%

25.4%

25.9%

26.0%

Average purchase rate per annum

22.528%

22.734%

22.849%

23.318%

23.515%

Average interest-free purchase term (days)

336

280

285

318

316

Number of introductory interest-free purchase deals

70

53

56

58

59

Average interest-free balance transfer term (days)

540

529

550

546

548

Number of introductory interest-free balance transfer deals

78

57

59

61

61

Average balance transfer fee

2.29%

2.28%

2.12%

2.13%

2.10%

Data based on the start of the month.

Source: Moneyfacts Treasury Reports

Credit card market analysis

 

Sep-19

Sep-20

Jun-21

Aug-21

Sep-21

Average purchase APR (includes fee)

24.7%

25.2%

25.4%

25.9%

26.0%

Average purchase rate per annum

22.528%

22.734%

22.849%

23.318%

23.515%

Average interest-free purchase term (days)

336

280

285

318

316

Number of introductory interest-free purchase deals

70

53

56

58

59

Average interest-free balance transfer term (days)

540

529

550

546

548

Number of introductory interest-free balance transfer deals

78

57

59

61

61

Average balance transfer fee

2.29%

2.28%

2.12%

2.13%

2.10%

Data based on the start of the month.

Source: Moneyfacts Treasury Reports

Rachel Springall, Finance Expert at Moneyfacts, said:

“The cost of making a purchase using a credit card outside of an introductory 0% offer has reached a record high due to a combination of changes during Q3 2021. A selection of low-rate credit cards worsened, some higher-than-average rate cards were launched, and other lower-than-average rate cards were withdrawn. In June, NatWest, RBS and Ulster Bank increased their 9.9% APR purchase rates to 12.9% and TSB increased its own from 7.9% APR to 9.9% APR. As it stands, there are only now cards available from Lloyds Banking Group, Tesco Bank and TSB that charge a purchase rate of 9.9% APR within the entire credit cards market.

“Shoppers who decide to spread the cost of their spend on a credit card and apply for a 0% purchase offer will find deals have improved over the past quarter, with the most notable lengthening of terms to 20, 21 and 22 months interest-free. In August, Tesco Bank increased its 0% purchase term from 20 months to a market-leading term of 22 months on its Clubcard Credit Card Purchases Mastercard and Barclaycard raised its 20-month 0% introductory purchase offer to 21 months on its Platinum All-Rounder Visa.

“Borrowers moving their debts to an interest-free balance transfer will find a handful of providers lengthening offers this quarter to 26, 27 and 29 months respectively.

One market-leading offer to increase from a 28-month deal to 29 months is the Sainsbury’s Bank Balance Transfer Credit Card Mastercard which charges a lower fee than its peers of 2.00%. There were several balance transfer fee reductions over the past quarter, the most significant was last month from TSB which fell from 2.95% to 1.45% on its Classic Credit Card Mastercard. Clearly, credit card providers are reviewing not just 0% terms but also the upfront cost to adjust their overall appeal to entice new business. We may well see more tweaks in the months to come as we head towards the festive season and some consumers may already be debating how to spread the cost.

“As interest purchase rates increase and 0% offers fluctuate, it's important consumers stay on top of the changing market and switch where appropriate. Those struggling financially in the aftermath of the UK lockdown would be wise to seek debt advice, check their credit report before applying for a credit card, and keep in mind that they may not always be granted the top deal advertised.”

Rachel Springall, Finance Expert at Moneyfacts, said:

“The cost of making a purchase using a credit card outside of an introductory 0% offer has reached a record high due to a combination of changes during Q3 2021. A selection of low-rate credit cards worsened, some higher-than-average rate cards were launched, and other lower-than-average rate cards were withdrawn. In June, NatWest, RBS and Ulster Bank increased their 9.9% APR purchase rates to 12.9% and TSB increased its own from 7.9% APR to 9.9% APR. As it stands, there are only now cards available from Lloyds Banking Group, Tesco Bank and TSB that charge a purchase rate of 9.9% APR within the entire credit cards market.

“Shoppers who decide to spread the cost of their spend on a credit card and apply for a 0% purchase offer will find deals have improved over the past quarter, with the most notable lengthening of terms to 20, 21 and 22 months interest-free. In August, Tesco Bank increased its 0% purchase term from 20 months to a market-leading term of 22 months on its Clubcard Credit Card Purchases Mastercard and Barclaycard raised its 20-month 0% introductory purchase offer to 21 months on its Platinum All-Rounder Visa.

“Borrowers moving their debts to an interest-free balance transfer will find a handful of providers lengthening offers this quarter to 26, 27 and 29 months respectively.

One market-leading offer to increase from a 28-month deal to 29 months is the Sainsbury’s Bank Balance Transfer Credit Card Mastercard which charges a lower fee than its peers of 2.00%. There were several balance transfer fee reductions over the past quarter, the most significant was last month from TSB which fell from 2.95% to 1.45% on its Classic Credit Card Mastercard. Clearly, credit card providers are reviewing not just 0% terms but also the upfront cost to adjust their overall appeal to entice new business. We may well see more tweaks in the months to come as we head towards the festive season and some consumers may already be debating how to spread the cost.

“As interest purchase rates increase and 0% offers fluctuate, it's important consumers stay on top of the changing market and switch where appropriate. Those struggling financially in the aftermath of the UK lockdown would be wise to seek debt advice, check their credit report before applying for a credit card, and keep in mind that they may not always be granted the top deal advertised.”

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Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts is the UK's leading independent provider of finance product data. For over 30 years Moneyfacts' information has been a key driver behind personal finance product decisions.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room with ISDN (01603 230551) and Skype (Moneyfacts).

 

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts is the UK's leading independent provider of finance product data. For over 30 years Moneyfacts' information has been a key driver behind personal finance product decisions.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room with ISDN (01603 230551) and Skype (Moneyfacts).

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert