By Ian Pollock
Personal finance reporter, BBC News
Not as much cash as before for the rate tarts
On the quiet, the banking industry has been steadily fighting back against a group of people who have been draining it of hundreds of millions of pounds in potential profit.
They are the rate tarts, people who move their borrowings from one credit card to another in search of a cheap deal.
Now, their opportunities to be as promiscuous as they like - in a strictly financial sense - have shrunk.
In July last year, we reported how card issuers were starting to levy one-off fees on customers who transferred a balance from a previous card to take advantage of a new 0% deal.
Back then, only 29 cards charged a fee. Now almost all do.
The following card issuers will still offer you 0% interest on transferred balances without levying a charge and for six months maximum. They are:
- Post Office
- Ulster bank
- Norwich & Peterborough
- Stroud & Swindon.
Of these, only the Post Office is a national organisation and the number of card issuers offering such deals is shrinking by the month.
Both Barclaycard and the Co-operative bank also offer a 0% deal without a transfer fee, each on one particular card, though neither of them is advertised on their web sites.
Sandra Quinn, of the banking industry organisation Apacs, is not surprised by this latest trend.
"Deals like this have a natural lifetime. A few years ago, cashbacks were very popular. Now hardly anyone offers them," she said.
The main reason that card companies are charging more is quite simple.
They are in business to make a profit.
And with other income streams being attacked by regulators, such as the default fees and intercharge fees on credit cards, and APRs on store cards, the banks will try to make up for this by raising charges elsewhere.
Richard Thompson, author of the annual "Precious Plastic" report for the accountants Price Waterhouse Coopers, said:
"Free balance transfers have bred a large number of people who move money around and who show little loyalty.
"But they are a relatively expensive way to attract new customers, so card issuers are looking to cut their costs."
Andrew Hagger, from the financial information service Moneyfacts, pointed to another factor.
"It's not surprising that we have seen the credit card companies react in this way.
"Zero percent cards cost the industry about £600m a year. In the last year or so, bad debts have come back again, so they have to recoup their money in other ways."
The rate tarts had been taking advantage of competition among lenders who were only too happy to charge no interest at all on transferred balances, often for up to a year, in the hope that the new customers would eventually stay and become more lucrative.
But the sums being borrowed so cheaply were huge.
Apacs estimates that in 2005 there were 10.5m balance transfers, with £19bn being moved from one card to another. Most of that would have been at 0%.
Those amounts are likely to be much lower for this year.
"The trend now is for the fee to start at 2.5% or even 3% - and it may be uncapped," said Andrew Hagger.
"It is increasingly common for there to be no upper limit, so the transfer fee will be charged on the full balance."
All this may come as a surprise to anyone who hoped they could save money for ever by changing lenders every six to twelve months.
Sandra Quinn said: "I think most have been doing this on the assumption that this would come to an end - but paying a fee is still better than paying interest on a large outstanding balance."
The various banks and other credit card issuers haven't given up entirely on trying to poach each other's customers.
Increasingly they are offering low rates of interest, say 5%, on transferred balances, but for the lifetime of the loan, which makes those deals just about the cheapest form of borrowing available.
So rate tarts may continue to thrive, just not as much as before.