Barclaycard first to offer 0% for year

BARCLAYCARD is to become the first credit card company to offer free credit for 12 months. The firm, owned by banking group Barclays, will relaunch the card as part of a major overhaul in June.

However, its controversial '0% forever' offer, labelled as 'misleading' by the Office of Fair Trading, will be scrapped.

'We recognised that given the criticism, that unless there‘s real substance in the new deal, then we would be putting ourselves in the firing line again,' said a Barclaycard spokesman.

Last November, the OFT criticised the firm‘s adverts offering 0% on transfers until the balance is paid off. In fact any repayments go towards the 0% balance transfer instead of new spending, which is charged at up 17.9%.

In December, Matt Barrett, Barclays chief executive, stoked the row by admitting to a Treasury Select Committee investigating that he would never borrow on Barclaycard.

The firm changed the way the 0% deal was marketed after the criticism but has only now decided to axe it altogether. In future, selected borrowers will be offered 0% on both balance transfers and new spending. However, the zero rate will be offered only to applicants with the best credit records. Others will be offered higher rates. Barclaycard claims that these riskier customers would be turned away from some other low-rate credit card providers, such as Egg which does not offer 'personal pricing'.

The Consumers‘ Association, which fiercely criticised Barclaycard‘s '0% forever' deal, gave the shake-up a cautious welcome. 'It‘s a step forward,' said principal researcher Mike Naylor, 'but we will have to wait and see how clearly the small print is explained.'

The new card is expected to have a new standard APR of 13.9% compared to the current 17.9%. Existing customers will be denied balance transfers at 0% but will be offered 'competitive' rates of as low as '2% or 3%'. These transfers will also be subject to a one-off fee of 2%.

The zero heroes

DOZENS of credit card companies offer 0%, with the longest period – nine months - from Halifax.

The market for cards with initial 0% periods has exploded since Cahoot introduced the first one three and a half years ago. Cahoot quickly backed away from the scheme and opted to offer competitive standard rates instead. But Egg has continued with an interest-free deal ever since, spurring other providers to follow suit.

Barclaycard, with nine million customers, only last year bowed to commercial pressures and began offering 0%, but only on balance transfers.

Defaqto, a financial services research company, says 43 cards offer 0% on both transfers and new spending. The companies are included below – but remember that they might offer other cards with higher rates. Always check the small print.

And before running up huge debts, consider how you will one day clear the balance.

Bank of Scotland, Birmingham Midshires, Britannia, Citibank, Clydesdale Bank, Co-operative, Egg, GM Card, Halifax, Leeds & Hobeck, Lloyds TSB Marbles, Morgan Stanley, Nationwide, MINT, Royal Bank of Scotland, Sainsbury‘s Bank, Stroud & Swindon, Tesco and Yorkshire Bank.