Interest-free balance transfer credit card deals plummet to record lows

Published by Stephen Little on 18 September 2018.
Last updated on 18 September 2018

Ban on card surcharges comes into force

Credit card lenders are tightening their interest-free offers, potentially increasing the problems for those stuck in persistent debt.

The number of interest-free balance transfer credit card deals available has sunk to its lowest level on record, coinciding with a drop in the number of introductory interest-free purchase deals.

The number of introductory interest-free balance transfer deals fell from 99 in January to 87 in September, according to research from savings website Moneyfacts.

Over the same period the number of interest-free purchase deals dropped from 91 in January to 75 – the lowest since July 2006.

Meanwhile, the average interest-free balance transfer term fell from 632 days in January to 581 in September.

  Jan-18 Jun-18 Sep-18
Number of introductory interest-free balance transfer deals 99 101 87
Average interest-free balance transfer term (days) 632 595 581
Number of introductory interest-free purchase deals 91 88 75
Average interest-free purchase term (days) 352 360 363
Average introductory balance transfer fee % 2.04% 2.07% 2.20%

Source: Moneyfacts, September 2018

This means consumers who rely on switching their debts from one interest-free deal to another will now have less time to repay their debt before interest applies.

If you’re looking for a new credit card, check the Moneywise best buy pages for the best deals on the market right now.

Consumer debt rising

This comes at a time when consumer debt on credit cards is rising. According to The Money Charity, credit card debt in the UK hit £72.1 billion in June, with the average household owing £2,650. This was up from £68.5 billion, or £2,528 per household, the previous year.

The cost of making a balance transfer has also risen sharply, with the average introductory balance transfer fee hitting 2.20% in September, up from 2.04% in January.

Read more: Households struggle to pay bills as demand for debt help hits five-year high

Rachel Springall, finance expert at Moneyfacts, warns: “If lenders continue to tighten their interest-free offers, the cost of persistent debt will only escalate further and could result in customers paying out more in balance transfer fees, time and time again.

“Over the last quarter, interest-free balance transfer cards offering up to 36 months were withdrawn from the market, and other providers, such as Post Office Money, cut the length of their interest-free offers on balance transfers.”

She adds: “This consecutive tightening of the interest-free card market is likely to continue, particularly as we enter a period of economic uncertainty. Therefore, borrowers who are struggling to repay their balance would be wise to seek the help of debt advice charities before it spirals out of control.”

For more about how to get out of debt, read our 10 step guide.

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