Credit card providers are reducing the length of introductory interest-free balance transfer and purchase offers – while hiking the interest rates charged on credit card balances.
Since the start of October 2023, several major credit card providers have reduced either their 0% introductory purchase or balance transfer offers, according to Moneyfacts.
Barclaycard has reduced its 21-month introductory interest-free purchase transfer offer to 20 months and its 27-month balance transfer offer to 20 months.
Meanwhile Halifax has reduced its introductory interest-free 25-month balance transfer offer to 23 months.
Elsewhere, MBNA has reduced its introductory interest-free 19-month balance transfer offer to 18 months and Virgin Money has reduced its interest-free 25-month balance transfer offer to 24 months.
According to Moneyfacts data, over the past 12 months, the length of the top interest-free terms has shortened. The top 0% purchase offer in November 2022 offered 24 months interest-free compared to 21 months today, while the top 0% balance transfer offer in November 2022 offered 34 months interest-free compared to 29 months today.
Interest rates on the up: The best credit card deals now
At the same time, interest rates on credit card balances are also going up. Moneyfacts found that the average purchase APR on a credit card now stands at 34.5%, the highest figure since at least June 2006 when Moneyfacts’ electronic records began.
For customers looking for a new card, Barclaycard currently offers the best 0% balance transfer deal at 29 months with a 3.45% balance transfer fee. It also offers the best purchase deal with Barclaycard’s Platinum All-Round Visa offering 0% on purchases for 21 months.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Shoppers considering an interest-free credit card to spread the cost of their purchases would be wise to review the latest offers in the run-up to Black Friday and Cyber Monday this month, as some of the lengthiest 0% offers have been slashed.
“The top 0% introductory purchase credit card currently offers shoppers almost two years to pay back their debt, which could be a lifeline for those worried about covering the cost of Christmas this year.
“There are only a couple of weeks to go until Black Friday and Cyber Monday, but many retailers have already started tantalising consumers with offers. According to American Express, 41% of shoppers indicated deals and offers would influence their decision to spend more on gifts for family and friends.”
Credit card isn’t just for Christmas
However she warned that covering a rise in any spending may be difficult for some households, especially as they continue to face a cost-of-living crisis.
“A credit card should never be used in excess to cover the cost of Christmas, but they can be useful as a short-term method if borrowers stick to a repayment plan to not leave any debts hanging overhead for long.
“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. Those borrowers who do not have an interest-free offer on their current deal must be concerned that interest rates within the credit card market have risen, indeed the average purchase rate stands at a record high of 34.5% APR.”
