Borrowers looking for interest-free credit card should act quickly as deals fall

Consumers looking to transfer debt to an interest-free balance transfer card are being urged to act quickly, as new research shows that lenders have withdrawn 22 deals since the start of the year.

Research carried out by Moneyfacts.co.uk found that the number of interest-free balance transfer cards currently stands at a record low of just 54 deals – a fall of 22 since the start of 2020 when there were 76 deals available.

It is not unusual to see lenders pull attractive deals from the market during recessions, for example during the last recession, a similar number of deals (21) were withdrawn from the market – falling from 118 available at the start of December 2007 to 97 available at the start of June 2009. This means that borrowers looking to get the best deals available should act quickly or they may risk missing out on the most lucrative offers. As Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “The number of offers available to consumers has dropped since the start of 2020 and the fall echoes that seen during the past recession.

“Typically, credit card providers would rein in lucrative offers during a period of economic uncertainty so that they are not taking on too much risk. As experienced during the recession between 2007 and 2009, credit card providers pulled interest-free balance transfer cards and, since the start of January, the market has already felt a similar contraction thanks to the impact of the Coronavirus pandemic.”

Although lenders have been pulling deals from the interest-free balance transfer charts, there are still some highly attractive deals on offer. For example, M&S Bank and TSB both offer an interest-free term of 28 months. A list of the longest interest-free terms on balance transfer cards can be found in the chart below.

Top deals exclude cards with an annual card fee.

Before applying for a credit card, consumers should consider checking their credit score, as their score can impact whether their application is accepted or not. As Springall explained: “If consumers are looking to open a new credit card, then they would be wise to check their financial footprint by running off an up-to-date credit report. It’s quick and easy to do and it’s important to check on occasion to ensure there are no discrepancies that could count against their score. A good credit score can mean providers look more favourably on an applicant, but no consumer is guaranteed to be offered the top deal.”

The majority of interest-free balance transfer credit cards charge a transfer fee, which is usually a percentage of the debt added onto the debt when it is transferred onto the new card. The average fee charged to transfer debt onto an interest-free balance transfer card has increased since the start of the year, rising from 2.27% in January to 2.32% today. This would mean that for those looking to transfer a balance of £2,000 onto a new interest-free transfer credit card back in January, the average fee of 2.27% would have added £45.40 onto the debt, whereas today, the average rate of 2.32% would add £46.40 onto the debt.

Springall added: “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.”

The current lowest fees on an interest-free balance transfer credit card are:

Top deals exclude cards with an annual card fee.