One of the most popular credit card deals on the market, the 0 per cent balance transfer card, could disappear after the Government introduced a series of measures to tighten up lending rules, experts have warned.

The 0 per cent balance transfer card allowed millions of consumers to switch their debts from one card to another for a small fee, and pay no interest on the debt for about six months or even longer.

The card company would make money by encouraging consumers to use their plastic to buy things, or take money out of an cash machine. These activities would incur interest, often at rates of about 18 per cent or more.

However, the Department for Business, in a move that has been widely welcomed, has stopped the “swizz” of credit card companies insisting that any money paid off was used to repay the cheapest debt first, trapping the expensive debt on the card for as long as possible.

Kevin Brennan, the Consumer Affairs Minister, said: “Our consumer research showed that most consumers didn’t know this was happening and they felt this practise was a bit of a swizz.”

Banks have now agreed, as part of a voluntary deal, to pay off the most expensive debts of a credit card off first. The Department for Business has calculated this move will save consumers £296 million, equating to £7 for each adult in a year.

Some experts have warned, however, it could punish so-called “rate tarts”, savvy consumers who move their debts around from one zero per cent card to another.

Richard Thompson, partner at PricewaterhouseCoopers, the accountancy firm, said: “This will make 0 per cent balance transfer offers a less effective means of customer acquisition and will prompt the industry to innovate to attract new customers.”

Peter Harrison, credit cards expert at moneysupermarket.com, said: “Our own research shows that almost two-thirds of consumers don’t realise that the cheapest debt is paid off first on the majority of credit cards. This lack of understanding of the current repayment hierarchy system means many end up paying a huge amount of interest and the debt sentence can last for years.

“However, cardholders should be aware that this change in payment order may have some unintended consequences, for example a reduction of zero per cent balance transfer deals.”

Mr Brennan said if zero per cent balance transfer deals disappeared, it was a price worthy paying to improve the fairness of credit cards. “This is a big win; it is a total reversal of an industry practice,” he said.

Credit card companies will also have to inform customers when they intend to put up rates, making clear to consumers they have the right to cancel the card.

Some campaigners said they were disappointed that the Government had not gone further and legislated to stop card companies increasing credit limits without asking.

Linda Weatherhead of the watchdog Consumer Focus said: “The Government has missed a major opportunity to help consumers, in particular to address the industry practice of unsolicited and irresponsible credit limit increases.”

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