Average 0% balance transfer term on credit cards falls but competitive deals still available

Shoppers planning to spread the cost of Christmas by transferring their credit card balance to a 0% transfer credit card will be disappointed by the latest research showing that the average interest-free term on these cards has fallen to its lowest level in five years.

The research, due to be published in the Moneyfacts UK Unsecured Lending Trends Report, found that on the 1 December 2020, the average number of interest-free days on a 0% transfer credit card was 520 days, the lowest level since May 2015, when the number of average interest-free days was 518. This compares to a year ago, when on the 1 December 2019 the average interest-free term on 0% transfer credit cards was 536.

In addition to the average interest-free term falling, the number of 0% transfer credit cards available to consumers has also fallen year-on-year. On 1 December 2019, there were 75 0% transfer credit cards available in our charts, whereas on the 1 December 2020 the number of deals had fallen to 60. “Consumers looking to take advantage of an interest-free balance transfer offer will find less choice compared to 2019, at a time when some may well be looking to consolidate their debts for a bit of breathing space moving into the New Year,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “Providers have clearly been cautious with their offerings, not only due to the impact of the Coronavirus pandemic, but also other influences on the market over recent years, such as the crackdown on continuous credit card debt by the Financial Conduct Authority.”

Although the average length of time borrowers have to repay 0% transfer credit card debts and the number of deals available have fallen over the year, there are still some competitive deals available in the charts.

For example, TSB’s Platinum Balance Transfer Card Mastercard has an interest-free period of 29 months, after which it charges 19.9% APR. This card charges a 2.95% transfer fee in the first 90 days of opening and then a 3.00% fee.

Borrowers looking to transfer their debt for free will find that both Santander and Sainsbury’s Bank offer an 18-month interest-free period on cards that do not charge a balance transfer fee and have no monthly fees. Santander offers this on its Everyday Credit Card Mastercard, which charges 18.9% APR after the interest-free period has ended. Sainsbury’s Bank offers this on its No Balance Transfer Fee Credit Card Mastercard, which charges 20.9% APR after the interest-free period ends and comes with the added incentive of earning Nectar points when the card is used.

Consumers looking to take out a 0% balance credit card should consider acting quickly as the current economic uncertainty could lead to providers withdrawing deals in the new year. Springall added: “It is entirely plausible to see further contraction in the 0% credit card market as we enter 2021 due to the attitude of risk from card providers to take on new debts, so any consumers looking to secure a new deal would be wise to compare offers now. To put them in the best possible position, it is always wise to review their credit score . As with any debt, it is vital consumers make a clear plan to repay them before interest applies and avoid falling into a debt spiral. Those who are struggling could reach out to a debt advice charity too, to work on getting their situation under control.”