Figures from TotallyMoney show that those shifting the average interest-bearing credit card balance of £2,995 to a market-leading offer could save this amount by avoiding interest.
Those with lower credit scores who aren’t eligible for the top rates could still save as much as £881 with an 18-month balance transfer, while even those with lower scores than that could save £394.
Deals heating up
Alistair Douglas, TotallyMoney’s CEO, said two banks are now offering up to 33 months of interest-free credit to those with near-perfect credit scores.
By switching debt to these cards, Douglas said borrowers can pay a small fee of around 3% or 4% and pause interest payments for a set period.
Half of credit card users are paying interest on their balances, according to Douglas, so could benefit from this strategy.
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The best deals available are from HSBC and Barclaycard, which currently have 33-month offers that are likely to be available to those with the best credit scores.
When shifting the average interest-bearing balance of £1,679, the typical customer could avoid £1,679 in interest payments with the HSBC product and £1,671 with the Barclaycard one. The difference is due to a lower fee with HSBC.
Those with lower scores could consider 18- or 12-month deals with Vanquis and Fluid, which have a 2.9% of balance or 3% of balance fee respectively.
Those who don’t want to pay a fee at all also have an option. Barclaycard has a 14-month product that is fee-free, meaning successful applicants could save £753 at no extra cost.
“If you’re paying interest on your credit card and looking to spring clean your finances, then it’s probably time to consider a balance transfer. They’re an effective way to cut costs, and you could start saving money before the start of the summer,” Douglas said.
Getting ready to transfer
Douglas urged those who want to shift their debt to check their credit rating to see what deals they might be eligible for.
“Check your report and make sure everything is up to date and correct. You should also look out for offers [that] come with pre-approval, and guarantee the rates, limit, and length of the offer.
“That way you’ll know if you’ll be accepted before you apply, and you can be totally sure of getting what was on offer,” he added.
Aaron Peake, personal finance expert at credit report provider CredAbility, added that if you do need to use a balance transfer to shift debt, it’s a good idea to make a plan to pay the debt off at the end of the period.
He said: “If you’re regularly carrying a balance month to month, switching cards might offer breathing room, but it’s also worth using this time to build habits that help you avoid falling back into the same pattern.
“It’s easy to focus on the interest-free period as a way to delay, but to make the most of it, you should treat it like a repayment deadline. Set yourself a realistic repayment plan and automate it if you can.
“Divide your balance by the number of months you’ve got interest-free and aim to clear it within that time.”
