Choice of credit card and loan providers drop to record lows

Meanwhile, interest rates edged higher during the third quarter of 2024.

The number of credit card providers dropped to 34 in September, the lowest count on Moneyfacts’ records which go back to June 2006. This is according to data from the Moneyfacts UK Unsecured Lending Trends Treasury Report.

Similarly, the number of lenders offering unsecured loans fell to 25, the lowest level since April 2012.

This means borrowers on the hunt for a competitive loan or credit card now have fewer providers to choose from.

“Sainsbury’s Bank withdrew from the loans and credit card market, and Metro Bank withdrew from the credit card market, which has resulted in the lowest number of credit card providers seen on our records and the lowest count of loan providers seen in over a decade,” Rachel Springall, Finance Expert at Moneyfacts, noted.

In a further blow to borrowers, interest rates on loans and credit cards increased marginally between June and September.

More expensive to borrow

The average purchase annual percentage rate (APR) on credit cards rose from 35.3% in June to 35.5% in September. Although this APR was slightly higher in August (35.6%), borrowing on a credit card is still more expensive than a few months ago.

Interest rates have increased notably over the past couple of years, with the average credit card purchase APR standing at just 31.8% in September 2023 and 29.6% in September 2022.

Unsecured loans also became more expensive in the three months to September.

For example, the average APR on a £5,000 loan borrowed over three years rose from 11.7% in June to 11.9% in September.

Despite the slightly higher rates, an unsecured personal loan may still be worth considering for borrowers who would prefer a fixed repayment plan.

However, “around 56% of the market now consists of loans restricted to those with an existing relationship with the lender,” Springall pointed out, which means borrowers should check which loans they may be eligible for before applying.

Interest-free offers

Borrowers who want to move their existing credit card debt to an interest-free balance transfer credit card now only have 58 deals to choose from, compared to 60 in June.

Furthermore, the average interest-free balance transfer term dropped from 522 days in June to 514 days in September.

This means that borrowers have fewer balance transfer offers to consider and a shorter period of time to pay off their credit card balance before interest charges start applying.

It’s a similar story for borrowers wanting to take advantage of interest-free purchase credit cards. While the number of 0% purchase credit cards available remained the same at 58, the average interest-free purchase term fell from 264 days in June to 253 days in September.

“Those borrowers searching for an introductory 0% credit card deal may be disappointed to see both the average terms for purchases and balance transfers reduced during Q3 2024,” Springall commented.

“These deals would typically become more popular as we approach the festive season for those looking to spread the cost of their purchases, or indeed shift an existing debt to an interest-free balance transfer offer to give themselves more time to pay it off,” she added.

Considering the risks

Anyone thinking of applying for a loan or credit card should make sure it’s the right decision for them.

Borrowing can be a useful way to pay for any large expenses, such as home improvements, holidays and Christmas spending, but it’s important you only borrow the amount that you can afford to repay, otherwise you risk missing payments and getting into expensive debt.

It can be particularly easy to overspend on credit cards and, with interest rates edging higher, it’s even more crucial to stay in control of your spending and take advantage of any interest-free offers that could cut the amount of interest you pay.

If you’re finding it difficult to make payments and you’re worried about debt, speak to your provider as soon as possible and, if necessary, contact a debt charity for professional advice on your situation.