0% credit cards – It’s a trap. Really.

ClearDebt’s Andrew Smith comments on credit card debt and how it can trap many people who already have debt problems.

The Daily Mail ran an article on credit card debt the other day, telling people to beware of credit card companies bearing gifts (in this case, 0% interest balance transfers). The article implied that the banks were again aiming to capture unwary consumers and condemn them to a future of debt.

I was surprised by some of the reaction to this – Andrew Ellson, of the Times used Twitter to poo-poo the piece, saying that this was a sign of the banks charging decent interest rates at last.

Maybe.

But, I have another theory. Banks aren’t generous. Banks don’t do anything that won’t make money. Banks know that people with a lot of expensive debt on other credit cards got where they are today by failing to manage their money. Banks know that to someone who can’t pay their Egg card this month that a 0% balance transfer rate is just the lifebelt the guy drowning in debt has been looking for. And – I reckon – they also know that two or three months down the line that person is going to be drowning again and will miss a payment or not be able to pay the minimum (after all, he made a BIG balance transfer, just to get rid of all that interest he was being charged on his seven maxed-out cards).

So, take dear old Barclaycard. Miss one payment… Fail to pay the minimum just once and that 0% goes forever and in comes a typical 16.9% variable. It’s here (point 8) in black and white:  Suddenly, even if you struggle, you are a very profitable customer for Barclays. And don’t tell me they risk these customers failing and thus they are going to help them out. They knew they were taking a risk. They probably have a little man somewhere that calculates this. he told the marketing department what the risk of failure was and how many would just go on paying month after month, even though they couldn’t afford it. Barclays, and the other providers suddenly reviving the 0% balance transfers are, I think, laughing all the way to the bank.

I bet, if you look, you can find examples of promotional rates with nasty stings in the tails for the unwary. Please post them here if you do.