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Why now is the time to move your credit card debt

Written by: Emma Lunn
The balance transfer credit card market is flourishing with the average number of interest-free months at its highest since November 2018 and fees at their lowest in 15 years.

Balance transfer credit cards allow people to move existing credit card debts to a card charging 0% interest for a number of months. There is normally a ‘balance transfer fee’, expressed as a percentage of the debt transferred, for doing this.

According to Moneyfacts UK Unsecured Lending Trends Treasury Report, the average interest-free balance transfer term on credit cards rose to 577 days in December, from 548 days in September. This time last year the average 0% term stood at 520 days.

The current term is the longest seen since November 2018 when it was 580. There are now 68 balance transfer deals available, the most there have been throughout 2021.

Balance transfer fees have fallen to 1.96% on average, down from 2.22% a year ago. The current figure is the lowest recorded since October 2006 when the average fee was 1.82%.

Purchase credit card APRS on the up

According to Moneyfacts, between the start of September and the start of December 2021 (Q4 2021), the average purchase APR (which includes card fees) rose to 26.2% APR.

According to the data analyst’s records, which go back to June 2006, the highest rate recorded was 26.4% in October 2021. A combination of changes contributed to the latest rise, including rate increases to some cards and new card launches.

Interest-free purchase card terms worsened over the past quarter, now offering 303 days at 0% on average, down from 316 days in September. This time last year the average 0% purchase term stood at 278 days. The longest recorded was 381 in May 2017.

Rachel Springall, finance expert at Moneyfacts, said: “In the run-up to the festive season it seems credit card providers have made overhauls to their interest-free balance transfer offers, which could well be perfectly timed for borrowers looking to consolidate their debts and have more time to pay off their balance without incurring interest. 0% introductory balance transfer terms have lengthened, associated fees to transfer have fallen and there is more choice.

“One provider to make a notable change was Tesco Bank, which increased its balance transfer card by one month to 27 months and dropped its transfer fee to 1.19%, down from 1.49%. Santander also launched a 31-month 0% introductory balance transfer card in September, currently the longest term on the market and the longest term since 2019.

“Spenders will have found a slight fluctuation with interest-free purchase offers this quarter, despite a slight fall in the average 0% term since September, interest-free terms are still up compared to a year ago and there are a few more deals to choose from.

“Outside of a 0% offer though, the average purchase APR has risen to 26.2%. Some card providers increased their purchase rates during the quarter, including Tesco Bank which saw an increase from 20.9% to 21.9% on its Low Fee Balance Transfer Clubcard Mastercard and American Express, which increased rates across its entire card range, which included its Platinum Cashback Credit Card from 27.3% APR to 29.8%.”

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