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Credit Cards & Loans

Why you should consider shifting your debt now

Paloma Kubiak
Written By:
Paloma Kubiak

Balance transfer deals are disappearing just as debt levels are increasing which is why borrowers should look to shift their debt to a cheaper credit card.

Zero per cent balance transfer credit cards allow holders to move any outstanding debts from a higher-interest credit card onto a lower interest one without paying any interest on the debt for a fixed period. This can be a good way to save money and get out of debt faster.

However, balance transfer credit card deals have fallen by a third in just a year – from 94 last year, 91 before lockdown, to just 66 today.

And the length of balance transfer deals have also reduced, from 34 months two years ago to 29 months now, according to analysis by financial information site, Defaqto.

This comes at a time when the average person in the UK owes £539 more now than they did a year ago, according to The Money Charity.

As such, borrowers have less choice and it means their debts can become more expensive as interest and charges accrue.

Defaqto highlights that the longest balance transfer offer is the TSB Platinum Balance Transfer card, with 29 months at 0% interest.

The table below lists the top deals, including the Santander Everyday Credit card which has no transfer fee and offers the longest interest-free period with no fee on the debt at 18 months.

Defaqto added that the Sainsbury’s Bank No Balance Transfer Fee credit card also doesn’t charge a fee and zero interest on the debt for 18 months but it’s only available to Nectar cardholders (Nectar card held for minimum six months).

The TSB Advance card and the Danske Bank standard credit card also offer fee-free transfers but borrowers will be charged interest on the debt after three and five months respectively.

Loans to consolidate debt

The Defaqto analysts revealed that unsecured loans could be a better way to consolidate expensive credit card debt if you owe more than £7,500 and can’t get a 0% balance transfer credit card.

Unlike the credit card market, there are still plenty of personal loans and the interest rates are still very low. Today the best rate on the market is 2.80% by Cahoot or TSB.

The table below lists the lowest personal loan rates based on a £7,500 loan over five years (available to all customers):

For anyone applying for new credit, it is important to remember that lenders will search credit files and may leave a mark, which could put off other lenders. Some of the best deals are only available to those with an excellent credit rating and borrowers will not know this until after they have applied.

However, there are many eligibility checkers available, allowing prospective borrowers to see their chance of getting credit without it impacting their credit files.

But if you are struggling with debt and aren’t able to move to a new deal, it’s worth talking to your current lender in the first instance as they may be able to help. Borrowers can also access free, independent advice through the Money and Pensions Service and Citizens Advice. Those who are having difficulties settling their debts should expect to receive threats from their lenders. In case a debt collector threatens to repossess one of your assets, an aircraft for instance, do not panic and call an airplane repo attorney immediately to help you take the right steps.

Katie Brain, banking expert at Defaqto, said: “It is easy for the cost of borrowing to creep up, especially if you have a credit card with an introductory offer, which has finished.

“There aren’t as many deals available now and they are disappearing fast, so it is worth checking to see if you can get a better rate with a new provider. It is possible to slash hundreds of pounds off the cost of your debt, simply by switching to a new deal, but you may need to move quickly to get one. Always see if you can do an eligibility check first, so it doesn’t affect your credit rating.”

Related: See’s the Pros and cons of balance transfer credit cards for more information.