Credit card demand means better products, more approvals

By Benjamin Salisbury

Consumers are benefiting from an increased demand for credit cards, with new, better products on the market (including some tempting long-term balance transfer deals) and more approved credit card applications.

The Bank of England said in its Q4 2014 report that in the aftermath of the financial crisis, demand for credit card borrowing fell as consumers focused on repaying debts. Now, however, a combination of the UK's improving economic outlook, more lenient lending criteria and marketing offers intended to increase issuers' market share are all contributing to a rise in credit card borrowing. Consumer demand for credit cards is at an eight-year high -- a trend that should continue through March 2015, according to the Bank.

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More, better deals
Credit card companies are trying to build demand by offering consumers tempting new offers. For example, since the beginning of 2015, borrowers have seen the launch of more balance transfer credit cards such as Barclaycard's Platinum Purchase, which offers 20 months at 0% on
balance transfers with a 1.49% transfer fee.

Other deals include the Tesco Bank Clubcard credit card, which now offers 21 months interest-free on purchases, and Santander's offer of 0% on purchases and balance transfers.

Less-strict lending criteria
The Bank's report shows that in the last six months of 2014, there was a significant rise in the number of credit card applications being approved. That's driven by issuers' efforts to grow their customer numbers in 2015.

It may be that the loosening in lending is happening because lenders judge that consumers are better at managing their debts and repaying credit card balances than they were a few years ago.

However, a spokesman from the UK Cards Association said in an emailed response to questions that approvals are not guaranteed. "Each application is subject to a rigorous risk and affordability assessment," he said. "Credit scoring criteria is based on each card issuer's individual risk appetite in the current economic climate and its business objectives."

"As a responsible lender we continually assess our credit policy to ensure we meet customer needs and maintain our risk appetite," a spokeswoman for Lloyds Bank agreed in an emailed response to questions.

See related: What is APR and how is it calculated?, 4 tips for avoiding balance-transfer traps

Published: 23 February 2015