Flat rates of interest preferred

A report commissioned by credit card company Capital One claims there is likely to be a reduction in the number of cards offering interest free introductory deals and a surge in the number of credit cards offering flat rates of interest. The report found there are a growing number of credit customers looking for cards offering low flat rates of interest as opposed to have to switch providers every six months when their introductory periods expire.

The report by Professor Merlin Stone of the Bristol Business School reveals that if people were looking to take out a new credit card, 61% of respondents would prefer a low interest flat rate card as opposed to a card offering introductory rates for purchases and balances transfers. Last year the figure was just 35% of respondents.

The report estimates that the card industry is losing over £80 million a month as a result of consumers taking advantage of interest free periods and switching to a diffe providers once they expire.

Professor Merlin Stone, Bristol Business School, remarked: “Card issuers will also increasingly look to find other ways in which to differentiate, the most obvious being the introduction of standard flat rates of interest.”

A number of cards offer one flat rate of interest for both purchases and balance transfers, including ones from MBNA and Virgin.