Interest-free periods on credit cards set to shrink as Christmas approaches

Banks and building societies expect to cut the length of interest-free periods on new credit card lending as Christmas approaches, a Bank of England survey has found.

As the country prepares for Brexit, some businesses may also find it tougher to get a loan as lenders expect the overall availability of credit to the corporate sector to decrease in the next few months.

The Bank’s latest Credit Conditions Survey asks lenders every quarter about the past three months and their expectations for the coming three months.

The survey for the third quarter of 2019, which took place between September 2 and 20, found that the length of interest-free periods on new credit card lending had decreased in the previous three months, for balance transfers and new purchases.

The survey found further decreases in interest-free periods were expected in the coming three months, just as households prepare for shopping bonanzas as Christmas approaches.

The survey also found there was an increase in defaults on credit cards and other non-mortgage loans in the third quarter.

Lenders expect default rates for non-mortgage lending to increase slightly in the fourth quarter.

Looking at business lending, the report said: “The overall availability of credit to the corporate sector was reported to have remained unchanged in (quarter three), and this was the case for small, medium and large businesses.

“The overall availability of credit to the corporate sector was expected to decrease in (quarter four).”