Low interest credit cards tempting 'tarts'

As more and more credit cards start charging fees for zero per cent balance transfers, UK consumers are increasingly moving to cards with low standard rates of interest.

New data from moneysupermarket.com has shown demand for a card with an interest rate that starts low and stays low jumped 25 per cent in the last year.

While the credit cards most in demand were still those with a zero per cent introductory offer, the hassle of continually switching providers to avoid paying interest - or risk being stung by high interest rates - is seeing more people move to a low flat-rate card.

And as more card providers levy fees on balance transfers, reformed 'rate tarts' are being tempted by the long-term commitment of a low standard rate.

"While zero per cent introductory balance transfer deals remain the most popular type of credit card among moneysupermarket.com consumers, there has been an enormous uplift in the number of people exploring the best deals for low flat rate cards," said Richard Mason, director of credit cards the price comparison website.

"It may be that people don't want, nor have the discipline, to be savvy rate tarts over the longer term, especially now that many zero per cent cards have started to impose balance transfer fees," he added.

A report by professor Merlin Stone of the Bristol Business School found that around 4.2 million people have taken advantage of credit card companies offering zero per cent interest-free periods on credit cards.

But less than two thirds of these people succeed in paying off their balances before the interest-free period runs out, according to the study.

And for those forgetful Britons a move to a card with a low standard rate seems attractive.

There are now seven credit cards offering standard rates under ten per cent, moneysupermarket found, with Halifax leading the way charging a flat rate of 5.9 per cent - a good deal lower than many unsecured personal loans.

And for a consumer paying off just the minimum amount on their card - or intending to use it for purchases other than the initial balance transfer, a card with a low standard rate can work out cheaper.

Moneysupermarket found that someone with a £1,500 balance, making the minimum payments, would be more than £250 better off taking out the Halifax 5.9 per cent card rather than the best zero per cent introductory-offer card.

According to the price comparison website this is currently Halifax's One card - offering nine months interest-free on balance transfers and 12.9 per cent APR after the initial period is up.

Of course anyone successfully transferring their balance to new zero per cent deals for the term of the loan would pay no interest whatsoever.

"It seems there is a clear demand for low standard rate cards and providers are beginning to respond," said Mr Mason.

"For a long time, Capital One led the way with its 6.9 per cent flat rate card, but now Halifax and Co-op has joined the fold, and I'm sure more providers will follow suit, making this market more competitive as they realise the potential of offering this type of deal," he concluded.