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Banks focus on lower risk credit customers as economic headwinds strengthen – research

  • 27/06/2018
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Banks focus on lower risk credit customers as economic headwinds strengthen – research
In anticipation of an interest rate rise, banks are starting to focus on lower risk customers as the economic headwinds get stronger, research has showed.

As such, credit policies for cards providers are tightening, which means they are taking on less high-risk customers, data from ClearScore revealed.

Interest free periods on balance transfer have shifted from an average 42 to 36 months and under.

Key movers include Barclaycard, going from 42 months last January to 35mths now, and Sainsbury’s from 43 months last January to 30 months, as well as Virgin Money moving from 40 months in June 2017 to 36 months.



Banks’ withdrawals

Banks have also taken some competitive deals out of the market altogether.

Tesco bank withdrew their interest free period purchase card for a period of time before re-entering the market earlier this year with a reduced offering of 28mths at 0%.

MBNA removed their challenger brand NUBA from the market in May this year.

And the AA removed all of its credit cards from the market in April this year.

However, loan rates have remained stable since the beginning of 2017 and in some cases these have even decreased.

In January 2017 the lowest rate between £7500-£15000 was 2.8% and is now 2.7% by Sainsbury’s Bank.

Sarah Megginson, business development manager at ClearScore, said: “Despite the Bank of England holding fire on the interest rate rise in May, we’ve already seen changes over the past few months in the promotional offers available to consumers, such as credit card 0% balance transfers, interest free purchase cards and cash back.

“Over the last year credit card providers have reduced their interest-free balance transfer offers from 43 months to 36 months and this is expected to continue.

“We’re seeing the same trend for mortgage rates and loans, with the rates available slowly edging upwards.

“With a rate rise still on the horizon, we’re also seeing eligibility checks for financial products becoming more rigorous, with lenders more likely to offer products to those with a good financial history.”

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