Record low number of interest-free balance transfer deals
Economic pressures and growing scrutiny of the lending sector mean credit card providers are no longer scrambling to offer table-topping interest-free balance transfer products.
This has seen the number of 0% deals fall by 14 since June to just 87, research by Moneyfacts found.
The average number of days people have to pay back their debt has also gone down to 581 days from to 632 days in January.
However, the cost of making a balance transfer has risen sharply with the average fee during this period increasing to 2.20% from 2.04%.
Rachel Springall, finance expert at Moneyfacts, said: “Consumer debt on credit cards is on the rise, so there is a greater chance that borrowers may fail to repay their balance before interest applies.”
Credit card debt in the UK hit £72.1bn in June, which translates to £2,650 per household on average, according to The Money Charity. This is up from £68.5bn, or £2,528 per household, a year earlier.
With most credit card balances bearing interest, the cost of persistent debt will only escalate further if lenders continue to tighten their interest-free offers, Springall said.
“This could result in customers paying out more in balance transfer fees, time and time again.”
She added: “Over the last quarter, interest-free balance transfer cards offering up to 36 months were withdrawn from the market, and other providers, such as Post Office Money, cut the length of their interest-free offers on balance transfers.”
The number of credit cards offering an interest-free purchase deal has also fallen to the lowest point since July 2006, but the average term on these cards has remained relatively static, with the longest deals offering between 24 and 29 months.