You are here: Home - Credit Cards & Loans - News -

Bad news for balance transfer card customers

0
Written by:
26/02/2019
People who use balance transfer cards have less time to repay their debt before interest applies as the length of 0% deals has fallen in the past 12 months.

The longest interest-free deal available today is 32 months, down five months since this time a year ago, when the longest was 37 months, data from Moneyfacts shows.

A balance transfer is when users move their credit card debt to a new provider where they pay zero interest for a specified time. When the period ends, they start paying interest.

Despite the cut in length of introductory 0% interest balance transfer cards, 32 months’ interest-free is still 16 months more than the best deal on offer ten years ago, when the longest offer available was 16 months.

Zero interest deals peaked in 2017, when the longest you could get was 43 months.

New debt rules

The decline in the length of these deals coincides with the Financial Conduct Authority (FCA) stepping in with new rules to tackle issues surrounding persistent debt.

Under the rules, which firms have had to adhere to since September 2018, credit card providers need to contact customers who’ve been in persistent debt – where interest and charges are more than the original balance – for over 18 months.

They have to prompt customers to change their repayments and let them know that their card may be suspended if they don’t change their repayment pattern.

Once someone’s been in persistent debt for 36 months, the provider needs to offer a way to repay the balance in a reasonable period.

Credit card debt hit £72.2bn in December 2018, which translates to £2,634 per household on average, according to The Money Charity.

And 54% of credit card balances are bearing interest, UK Finance said.

To make matters worse, balance transfer fees have also risen on average meaning the cost to the borrower is higher upfront.

Rachel Springall, finance expert at Moneyfacts, said: “Any borrower who is looking to consolidate their debts by using a 0% credit card would be wise to set out an appropriate repayment plan and stick to it, but also be wary of upfront fees to transfer debts.

“The longest 0% balance transfer deals on the market may well be cut down further this year as the market faces economic uncertainties, so borrowers might want to act soon to snap up the lengthiest interest-free offers.”

Best 0% deals

HSBC offers a 32-month 0% card with a balance transfer fee of 1.4%.

Post Office Money also offers 32 months interest free, but the fee is 2%.

If you want to pay a lower fee, Virgin Money’s 29-month 0% card charges 1.75% and M&S Bank offers 28 months interest-free for a fee of 0.99%.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • 'Over the last year, the amount of money saved in Innovative Finance ISAs – or IFISAs – has increased by over 700%'- https://t.co/dPjhoorgPp
  • Sainsbury’s and Asda promise £1bn of lower prices if merger goes ahead - https://t.co/pf3D3sPOXb
  • Are you planning to make a last-minute investment into your ISA or SIPP during this tax year? Here are five tips to… https://t.co/lGjHix7F7y

Read previous post:
Holidaymakers should expect lengthy queues in ‘no deal’ scenario

Travellers to Alicante in Spain may by worst hit by additional entry checks at EU airports in the event of...

Close