Interest-free credit cards offer cuts
Moneyfacts says the changes in the balance transfer credit card market echoes previous recessions.
The latest analysis from the financial data company found that the number of 0% introductory balance transfer offers has fallen to a record low. The drop since the start of 2020 echoes the fallout in the market seen in the 2007-09 recession.
There are now just 54 interest-free balance transfer cards available, down from 76 cards available at the start of 2020 – a difference of 22 cards.
During the last recession, between the start of December 2007 and June 2009, the number of interest-free balance transfer cards fell from 118 to 97 – a difference of 21 offers.
Balance transfer fees
The cost of moving debts is also on the rise, with the average balance transfer fee increasing from 2.27% in January 2020 to 2.32% now.
During the last recession, between the start of December 2007 and June 2009, the average balance transfer fee increased from 2.56% to 2.67%.
Separate analysis of the interest-free balance transfer card market shows that since the start of 2020, the number of cards with no balance transfer fee charged upfront are down from 13 deals from 11 providers in January, to nine deals from seven providers today,
Barclaycard, Tesco Bank, Halifax and Lloyds Bank have all pulled their fee-free offers from the market.
But Natwest, RBS, Ulster Bank, Santander and Danske Bank all still offer 0% interest balance transfer cards with no balance transfer fee.
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Borrowers searching for a new deal may wish to act quickly, but they should also be wary of balance transfer fees. In fact, since the start of 2020, the average balance transfer fee has crept up from 2.27% to 2.32% and the right deal may not be the one with the lengthiest interest-free offer.
“At the moment there are a handful of offers that do not charge a balance transfer fee at all, such as the 20-month 0% interest offer from NatWest, and if borrowers are able to clear a £3,000 debt within this timeframe, they would save themselves £69.60 based on the average balance transfer fee today.”
“Those consumers who may need to clear their bank account overdraft could turn to a money transfer card and the longest 0% deal today comes from MBNA on its Long 0% Money Transfer Credit Card Mastercard at 18 months for a 2.99% fee.
“As temporary overdraft support comes to an end, some consumers could be charged around 40% for dipping into the red, and a money transfer card could be an option if borrowers feel like they will be unable to clear their overdraft in the short-term.”