But new data out today suggests terms on these interest-free credit cards are worsening meaning those seeking out deals should be scrupulous when checking the details of their 0% card.
Balance transfer credit cards allow consumers to move their credit card debt without incurring interest. An interest-free period is applied and this is the time in which users can pay back their debt before interest kicks in. It can vary from provider to provider and from product to product.
There is also a fee which is charged as a percentage of the balance.
So, anyone taking out one of these cards should consider both the length of the balance transfer period and the fee.
According to Moneyfactscompare.co.uk, two providers in this market have cut down their interest free periods. Tesco Bank reduced its market-leading 0% balance transfer offer from 29 months down to 27 months.
Meanwhile, Virgin Money cut its 28-month 0% balance transfer offer to 26 months.
It’s a trend which has been occurring over the last year. Moneyfactscompare said the top 0% balance transfer offer in August 2023 offered 30 months’ interest-free compared to 28 months today.
Meanwhile, interest rates on credit cards in general have increased, said Moneyfactscompare. It said the average purchase APR stands at its highest point on Moneyfacts’ electronic records of 35.6% APR since records began in June 2006.
It makes moving to a 0% option even more attractive.
Currently, according to Moneyfactscompare, the balance transfer card with the longest 0% offer is Barclaycard, which is offering the interest free deal for 28 months. This comes with a fee of 3.45%.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Consumers looking to consolidate their credit card debts would typically turn to a 0% balance transfer offer, particularly when their existing debt is incurring interest at a high rate.
“Interest-free offers have unfortunately worsened in terms of the time given to borrowers to pay back their debt before interest applies.
“Those who do use these deals will usually have to pay a balance transfer fee, so it’s wise to keep this in mind if debts are going to be moved around often over the short-term.
“Some of the longest interest-free balance transfer offers carry higher transfer fees, but there are still some fee-free offers for borrowers to consider instead.”
‘Make a plan for repaying your debt’
If you are considering an interest-free credit card, it’s advised you pay more than the minimum each month to help lower the debt sooner. This will also mean you are more likely to repay the balance before the 0% offer ends.
Springall advises putting a plan in place to ensure you clear the debt before the end of this period.
She added: “Consumers who do not have an interest-free offer on their current deal might be concerned to know the average purchase rate stands at a record high of 35.6% APR. If someone borrowed £1,000 on a credit card that charges 35.6%, but made £100 in fixed repayments, it would cost them around £170 in interest and take a year to repay.
“However, if they stuck to repaying £50 per month, it would take more than twice as long to repay and cost around £421 in interest.”
