Credit cards - 0% balance transfer deals are being shortened.

Charities say this could cause hardship to borrowers already struggling to repay their credit card debts.

According to the Money Advice Trust, the number of people in need of debt advice is expected to reach a five year high by December.

And now, another report, the ‘Moneyfacts’ quarterly UK Credit Card Trends Treasury Report, has issued a warning for credit card customers with large debts.

Lenders are slashing 0% balance transfers and increasing fees.  The number of interest free balance transfer deals has fallen to an all-time low. This comes at the same time as an increase in balance transfer fees, hitting 2.20 per cent this month – up from 2.04 per cent in January.

For borrowers who depend on interest free balance transfers to manage their money and repay their debts this is bad news. It means they’ll now have less time to repay their debt before interest applies. And it could cost them more.

Government introduce new measures.

It comes just days after the Government introduced new measures to protect people who’ve been in credit card debt for more than 18 months.

The changes in the credit card market could be difficult for those who have depended on transfer deals. More people have been switching deals.  Not just for credit cards but also in the energy and insurance markets as a way to manage their money.

The Financial Conduct Authority (FCA), the government regulator, said from 1st September 2018, lenders will have to be more proactive in helping people that are trapped in persistent or long-term debt. This will include waiving interest fees where they are higher than repayments and even cancelling credit cards

The FCA say people will have had to have been struggling to repay their debt for 18 months or longer.  However, for those who have been using 0% balance transfer deals, they will not necessarily be seen as being in long term debt.

What the experts say.

Rachel Springall, finance expert at Moneyfacts said: –

“If lenders continue to tighten their interest-free offers, the cost of persistent debt will only escalate further.  And could result in customers paying out more in balance transfer fees, time and time again.”

The Bank of England (BoE) have been ongoing in warning about the booming consumer debt levels, which are, they say, a risk to the financial systems.

Last month the BoE raised interest rates from 0.5 per cent to 0.75 per cent.  The highest level since the global financial crisis a decade ago.

What the figures show.

Figures show the average household in the UK currently has £2,586 in credit card debt.

If you Include mortgage debt, the same amount totals £58,540.

The Overall debt amount owed by people in the UK, was nearly £1.6 trillion at the end of June 2018.  Up from £1.55 trillion a year earlier.

And according to the Office of National Statistics (ONS), in 2017, UK households saw their annual outgoings surpass their income for the first time in nearly 30 years.

This is making it increasingly difficult for millions of households to make ends meet. Research has shown that people are using credit cards to help them get through. Reducing the length of time to repay 0% balance deals will make things even more difficult for many.

One debt charity has said: –

“These smaller levels of debt are proving difficult to repay due to an increase in ‘broken budgets,’  where the money coming in is simply not enough to cover essential spending.”

It follows a report in August that found four in 10 households have just £7 a day left after factoring in essential monthly bills.

“The government must now push ahead with its planned ‘Breathing Space’ scheme – that will provide protections for people seeking advice from all types of creditors – including utility companies, local authorities, DWP and HMRC.”

“There is some good news with the creation of the new Single Financial Guidance Body. Plans for a statutory Breathing Space scheme and a renewed focus from creditors on supporting people in vulnerable circumstances.”

“However, with debt problems still changing and growing, there is much more to do – including a new formal cross-government strategy to reduce problem debt, which brings together different strands of work into a single, coherent approach.”