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Drive down debt with record credit card deals

Drive down debt with record credit card deals

Category: Credit cards

Updated: 16/11/2015
First Published: 26/08/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Looking to pay down your debt with a 0% balance transfer credit card? Well, we've got some great news, because not only is the average balance transfer fee at a record low, but interest-free deals have reached their longest ever terms!

Our figures show that, on average, balance transfer cards now offer 551 days of interest-free debt transfers, a significant increase from the average term of 477 days in August 2014 and far higher than the 314 recorded in August 2010. At the same time, the average balance transfer fee has dropped to 2.34% compared with 2.58% a year ago and 2.86% in 2010, keeping costs lower on both counts.

The table below highlights these changes in more detail.

Aug-08 Aug-10 Aug-13 Aug-14 Aug-15
Average balance transfer fee % 2.62% 2.86% 2.86% 2.58% 2.34%
Average 0% introductory balance transfer days 309 314 387 477 551

So, you now have an average of 17 months – give or take – to pay off your debt, without incurring additional interest charges. Remember, too, that this is just an average: the top balance transfer credit cards offer introductory terms that are far higher, with Virgin Money having recently launched a card that offers a whole 40 months of interest-free balance transfers!

Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider, such as Experian CreditExpert to investigate your credit report.

Competition really is fierce at the moment, with providers across the market looking to out-do each other and offer the best deals, as Rachel Springall, finance expert at Moneyfacts, comments: "Credit card holders looking to consolidate and clear their debts are being spoilt rotten by the latest deals to hit the market, some of which could save them hundreds of pounds in interest.

"The balance transfer market has undergone a dramatic transformation since the credit crisis, with some deals now offering up to 40 months of 0% interest on balance transfers. Balance transfer fees have also become more competitive: 13 deals with an interest-free term now carry no fee for transfers, compared with just five deals a year ago.

"This competitive market has never been so cut-throat, with providers constantly aiming for the spotlight by launching longer interest-free terms and lower fees. It's a win-win situation for borrowers who are ready to take advantage of these offerings."

Our calculations show that you could save a huge amount of money by using a balance transfer card, too. Based on a minimum repayment of £50 a month, a balance of £1,500 would take over three years to repay if you kept to a credit card offering a typical purchase interest rate of 18.9% APR. Not only that, but it'd cost you £446.32 in interest, with a total repayment cost of £1,946.32. Compare this with using the longest interest-free balance transfer term of 40 months, and you could save £401.47 in charges, giving a total repayment cost of just £1,544.85, including the balance transfer fee.

However, no matter which 0% deal you choose, just make sure that you can comfortably repay the balance before the interest-free deal comes to an end. In many cases this'll mean paying more than the minimum repayment each month, because if you haven't cleared the full amount by the end of the term, interest rates will kick in and you could end up paying more than you hoped.

Don't miss a repayment, either – doing so could invalidate the whole deal and see you charged a higher rate – but if you're organised, there's no reason why you can't benefit from the current market. Check out our balance transfer best buys to see just how competitive it is!

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.