How Bank Mergers Affect Balance Transfers

The unfolding financial crisis seems to be making itself felt in almost every area of our lives, from difficulty in getting mortgages to job losses and overall gloom. Much has been made of the increased difficulty in getting approved for a credit card, with credit limits being tightened and applications for new cards being scrutinised more carefully than in previous, more happy-go-lucky years.

One other aspect of the Credit Crunch's impact on the credit card market is rather less talked about: the increased difficulty of transferring balances.

Shrinking Credit Options

The most basic obstacle in the way of new balance transfers is the simple difficulty in having your application for a new card approved. Most banks and financial institutions are desperate to offload some of their lending, and where once a customer transferring in a large balance would be seen as an asset, it is now seen as a more risky undertaking. Even with approved card applications, credit limits are shrinking, meaning you might not be able to transfer your entire balance.

Bank Mergers and Takeovers

A more subtle difficulty is that card issuers will not allow low rate or 0% balance transfers between their own different cards. You can't transfer a balance from one Lloyds TSB card to another, for example. The problem now arising is that with so many banks merging and being taken over, there are fewer actual issuers out there, even though the number of card brands might stay the same.

You will not now, for example, be able to transfer a balance from a Lloyds card to a Halifax one, should the Lloyds TSB / HBOS merger finally go ahead. The same will likely apply to cards with Alliance & Leicester and Abbey brandings, as they are both ultimately issued by parent bank Santander.

A similar situation exists within the building society credit card market, with mergers such as that between Nationwide and the Derbyshire and Cheshire societies reducing the overall number of card lenders on the market.

The Future of Balance Transfers

So with a shrinking number of independent banking groups, and a tightening of lending criteria, is that the end of the balance transfer? Not necessarily, as there are still quite a number of international banks in good shape and happy to take on UK customers, including HSBC and others. For people who've been transferring balances from card to card for a number of years, though, limited options may force them to consider beginning to pay off the debt rather than delaying the inevitable for a while longer.


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