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Last Updated: Wednesday, 17 August 2005, 12:24 GMT 13:24 UK
Life gets harder for 'rate tarts'
Credit cards
Lenders raise cost of cheap cards
Credit card firms are increasingly clawing back money from customers known as "rate tarts", research has shown.

According to the financial research company Moneyfacts, 29 credit cards now charge a one-off fee on any debts transferred from another card.

Rate tarts move their debts between credit cards to take advantage of low-interest introductory offers.

The deals usually offer an interest rate of 0% for up to a year, and cost the industry an estimated 1bn a year.

'Key customer'

Low and 0% interest-rate offers have grown in popularity over the past few years reflecting the ferocious competition among card companies determined to lure new customers.

The rivalry has been good news for borrowers.

Market research firm Datamonitor says the introductory offers have helped push down the average interest rate charged for purchases on a UK credit card to 16% in March from 18.6% in June 1999.

However, credit card companies have been looking at ways of reducing the cost of offering these deals and those now charging for debt transfers are industry mainstays like Barclaycard, Citibank, Egg and MBNA.

Even so, Kieran Hines of Datamonitor does not expect the 0% deals to die out.

"A glance at the US market has shown that introductory rates can comfortably exist in the most mature of markets and will therefore remain a key customer acquisition tool for UK issuers," he said.

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