Against a background of falling interest rates, it is clear that discounted and capped mortgages - where rates are guaranteed not to go up but may come down - are proving more popular than ever. Many people are switching to them, increasingly opting out of variable- rate loans. But when it comes to credit cards, there is no such rush to switch into lower rates.
If you are one of those who don't pay off your credit card balance at the end of each month, why haven't you changed to another lender? Maybe you didn't know that there are better deals available on credit cards. Well, they are not marketed as such, but effectively the introductory rates offered on many credit cards now offer you exactly the same proposition as a fixed-rate mortgage does.
How? Take, for example, the two lowest rates currently available for people who switch their credit cards: Capital One Bank is charging 6.9 per cent APR until July, while RBS Advanta is offering 7.9 per cent APR until April. The APR is the "true" annual rate of interest charged on credit. How do these differ from a fixed-rate mortgage, except in the scale of the borrowing? There's no real difference at all. Even Barclaycard, the country's biggest credit card issuer, long derided by a minority of cardholders as not being particularly competitive, has got in on the fixed-rate deal. It is charging a less-than-generous 18.9 per cent APR until the end of the year. Not surprisingly, Barclaycard's lack of competitiveness means it has been forced to lay off 2,000 of its staff recently. Others offering enticing introductory rates include American Express's new Blue Amex, Birmingham Midshires, Co-operative Bank, First Direct, GM Card, Lloyds Bank and People's Bank, Connecticut. "With pressure on interest rates to rise further, it makes sense for credit card customers to fix on the lower rate while they can," points out Mark Austin of RBS Advanta, part of the Royal Bank of Scotland group. The sting in the tail, of course, is the rate that the card reverts to at the end of the special-offer period. Unlike mortgages, where the variable rate differs across the market by just 1 per cent, credit card standard rates vary by as much as 10 per cent. So tying into the wrong card for long periods is going to cost you more than you'll ever save by switching to a short-term lower rate. …