Consumers are being rewarded for disloyalty by credit card companies restricting best offers to new customers, says Defaqto’s in its latest report “Credit Cards in the UK”.
Despite the introduction of some ‘anniversary’ offers for existing customers, such as those offered by the Egg Card and the Post Office’s Two in One Credit Card, consumers are still able to get better deals by switching to a new card.
The average duration for an introductory 0% offer lasts 9.5 months for balance transfers and 5.6 months for purchases, whereas existing customer 0% anniversary offers are typically 5 or 6 months for balance transfers, so it is not difficult to see that consumers can be better off by applying for a new card.
David Black , Principal Consultant Banking, and author of the report, says: “There is a clear incentive for the creditworthy to review and change their credit card on a regular basis. The credit card industry is geared to routinely rewarding customer disloyalty for the creditworthy and there seems to be little evidence of this changing.”
Some market leading credit cards are offering 15 months 0% interest free credit: Virgin’s Credit Card for balance transfers and Halifax’s Purchase Card for purchases.
Cash back credit cards tell pretty much the same story, with the best ones invariably limited to an introductory period. Cash back rates of 6% (Shell MasterCard from Citi: on Shell fuel purchases for 3 months but paid as a discount on future fuel purchases), 5% (Amex Platinum: on spend up to £4,000 in the first three months; and Abbey Credit Card: on £1,000 of supermarket spend before 31 st January 2008), and 4% (Capital One Cash Back with World: for first three months) are some of the best available.
Black adds: “One area where credit card loyalty can be engendered is a rich reward scheme partnership with a national retailer or service provider whereby discounts are earned towards future high value purchases.”
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Defaqto has marked the first anniversary of its QuantRater fund rating service by launching an email messaging service to customers of its Aequos Engage product selection tool.
QuantRater ranks funds on a scale of one to five, with funds rated three and over showing above average efficiency in their use of risk and consistency of performance.
The quarterly service will send the 4,500 customers of Aequos Engage an updated listing of all funds with the top ratings of 4 and 5. At the same time, IFAs are being supplied with specialist training materials to show how to utilise QuantRater to maximum effect in the product search process.
In the investment product selection process within the bonds and pensions markets, the number of fund links available alongside products increases on an almost daily basis. Indeed the current average number of funds available alongside personal pension plans stands at 1,011. For those IFAs seeking to pick their own funds when creating a client’s investment portfolio the initial selection process and ongoing performance monitoring requires a great deal of resource, making time-saving tools such as Defaqto’s QuantRater particularly valuable.
Commenting on the situation, Fraser Donaldson, Principal Consultant - Investments at Defaqto said, “As investment houses jockey for position on bond and pension product fund panels, the quantitative ratings produced by Defaqto’s QuantRater will help them prove the capability of their funds.”
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Defaqto’s recently published ‘Retirement Savings & Income Report 2007 - A review of the individual retail pensions market in the UK’ (1) - shows that many consumers still trust themselves and their family and friends for advice on retirement planning.
Defaqto’s research (2) surveyed 1,000 consumers of which 27% stated that they trust their own judgement when it comes to advice on planning for their retirement, 23% trusted their friends and family and 12% trusted their spouse/partner.
In terms of professional advice, the research showed that overall 28% of consumers trust a financial adviser for retirement planning advice and 24% would trust their employers.
Lead author of the report Matt Ward, Defaqto’s Principal Consultant for Pensions and Wealth Management, stated that “The industry needs to find ways to build trust with the public and this will pay rich dividends in terms of both the amount of business generated as well as ensuring that people get the best advice in this vital area of their personal finances.”
Defaqto’s report also includes financial background information on key product providers 3 as well as data on the intermediaries’ preferred pension products, the evaluation of what is important to intermediaries in terms of product delivery and their assessment of the quality of service received by the principal providers.
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