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We're now just four weeks away from the shopping frenzies that are Black Friday and Cyber Monday, and many may already be thinking about how they are going to pay for it all. Unfortunately, those who are planning to pay by plastic may be sorely disappointed by the deals on offer at the moment.
That's because our latest data shows an unwelcome decrease in the length of interest-free card terms. Specifically, Moneyfacts.co.uk finance expert Rachel Springall reports that since the start of October, Barclaycard, Bank of Scotland, Halifax, Lloyds Bank, Tesco Bank and Virgin Money have cut either their interest-free balance transfer offers or their 0% purchase offers.
While the balance transfer card market has seen a much stronger decrease, with borrowers now having six months less on average than they did a year ago if they want to avoid paying interest on their debt, this could still impact shoppers. Say you're planning to put your festive purchases on a cashback credit card and then transfer the debt onto a 0% balance transfer card once you're done. You'll now not only have less time to pay off the debt interest-free, but you'll also likely need to pay a higher fee for transferring the debt.
In January, the average balance transfer fee stood at 2.04%, whereas now it's risen to 2.25%, with the table below illustrating the drop in the introductory term length. "At a time when shoppers are hoping to take advantage of some welcome discounts, it's disappointing to see interest-free credit card offers being reduced," commented Rachel.
|Longest introductory 0% balance transfer credit card (BT fee)||Longest introductory 0% purchase credit card|
|30 Oct '08||Virgin Money - 0% for 16 months (2.98%)||Capital One - 0% for 12 months|
|30 Oct '13||Barclaycard - 0% for 30 months (2.90%)||Tesco Bank - 0% for 18 months|
|30 Jan '17||Halifax - 0% for 43 months (3.28%)||Sainsbury's Bank - 0% for 29 months|
|30 Oct '17||Tesco Bank - 0% for 39 months (2.69%)||Sainsbury's Bank - 0% for 31 months|
|Today||MBNA - 0% for 33 months (1.99%)||Sainsbury's Bank - 0% for 29 months|
"In the last month alone we have seen several providers slash their interest-free deals, which has included some of the longest deals around," Rachel then went on to explain. "For instance, Lloyds Bank has slashed its 34-month interest-free balance transfer card to 32 months, while just last week, Tesco Bank and Barclaycard cut their 33-month deals to 30 and 32 months respectively, leaving just one 0% offer for 33 months in the market, from MBNA."
Those who are tempted to sign up for the current longest deal on the market from MBNA should beware that this could cost them an extra £99.50 upfront (based on a £5,000 debt and the current transfer fee of 1.99%). That's why it's always a good idea to compare cards on more than just the introductory terms.
Rachel further warns that "with economic uncertainties just around the corner it wouldn't be surprising to see balance transfer fees rise further still as providers increase the cost to sustain other card features." So, if you've accumulated some debt you're not ready to pay off fully yet (although remember that you'll need to make a minimum payment per month!), you may want to apply for a 0% interest balance transfer card sooner rather than later.
That said, Rachel reminds borrowers they "should be keeping on top of their credit score, such as with Experian, and also overpaying any credit card debt when they can afford to do so. If their debts get out of hand, they need to pull their heads out of the sand and seek advice from a debt charity before the situation gets much worse – nobody can rely on long interest-free offers being around forever."
If you're not worried about debt, there are still some great 0% interest purchase credit cards to choose from – as long as you make sure your credit rating is good enough to get accepted before you apply.
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