If you follow the financial news and financial pundits, you've probably heard that the heyday of the balance transfer is over - or at least in its dwindling days. Not so, say many market purveyors. Rather, the offers have been refined to cut out some of the losses the companies were suffering because of them. Of course, loss is a relative thing - when the card companies speak of loss, they mean 'less profit than expected'.
If you haven't had a reason to check out offers over the past few years, then here's a quick recap to bring you up to par on the issue and why some financial experts believe it is dead.
A few years back, companies realized that they'd nearly saturated the market. With statistics showing that the ratio of credit cards issued to adults in the UK is 4:1 - that's 4 credit cards out there for every single adult in the UK - it was clear that most people who could qualify had at least one card. That meant that instead of competing with each other to attract the dwindling number of adults who had no card yet, they had to compete to attract those that already had a with other companies. The scheme they came up with to do that was to offer special rates to those who would transfer the balance on their existing options to a new card with their company. The reasoning was that people would change loyalties if the reward was great enough. If you were paying 18% interest on a balance of £10000, you could save yourself in the neighborhood of £200 a year by moving that balance to a balance transfer with a 0% introductory rate for one year.
The competition between credit cards offered big benefits to consumers. As the advertised rates on each balance transfer dropped,
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