Interest-free credit card market shrinking
The longest 0 per cent interest period available on a credit card now stands at 26 months, down from 29 a year ago, according to Defaqto.
The financial information group is urging consumers to lock in deals now if they need to borrow for Black Friday or Christmas spending.
Defaqto found there are currently 78 credit cards with a 0 per cent interest deal on purchases available, a 29 per cent fall compared to two years ago, when there were 110.
Over the same period the length of time a borrower can benefit from interest-free purchase deals has fallen too. Just two years ago, the longest deal on the market was 32 months – nearly three years – offered by Sainsbury’s Bank. Today, the longest interest-free purchase deal is on offer from MBNA and is for just 26 months.
In 2017, there were 30 cards which offered a 0 per cent purchase offer for 24 months or more; now there are only five that offer an interest-free period of at least two years.
Most of these cards also offer a balance transfer deal for the same or similar period of time as the purchase offer, so customers could also get the added benefit of transferring any existing debt at the same time.
Katie Brain, banking expert at Defaqto, said: “Credit card companies use interest-free deals to tempt new customers in and they have been very effective in the past. For those who can afford to repay the amount borrowed before the interest free period ends, they can be a good way of borrowing interest free.
“With just seven weeks until Black Friday and 10 weeks until Christmas, anyone who is looking to take out a new credit card for their shopping should start thinking about it now. There are fewer deals available than last year and it will take a few weeks for the credit card to come through.
“It is easy to get into debt over the festive season and shoppers should carefully consider what they can really afford before taking on more credit. The interest-free deal is only a good deal if you can afford to pay all of your monthly repayments on time and pay off the final balance before the interest-free period ends.”
How to get the most from your credit card
- Make sure you know your credit limit and stay within it.
- Set yourself a budget and don’t go over it.
- Never miss a monthly payment on the credit card
- Remember deals only work if you make sure you stick to all the terms of the credit card deals.
- Make sure that you clear your balance by the end of any interest-free period, otherwise you will be charged interest on any outstanding debt.