Over the past twelve months the average interest-free period available on 0% balance transfer credit cards has reduced by 63 days, while their equivalent purchase cards have seen a reduction of 29 days, according to data from the Moneyfacts UK Credit Card Trends Treasury Report.
According to the report, which is due to be released later this week, although interest-free terms continue to be reduced, the rate of these reductions has slowed between April and June 2019 compared to previous months.
The average interest-free term on purchases has fallen to 331 days from 335 days, over the past three months, in comparison to a decrease of 14 days recorded between December 2018 to March 2019.
From April this year, interest-free balance transfer terms also fell at a slower pace than previously, with a reduction of seven days to 532 days between April to June compared to 30 days between December to March.
Whilst reducing interest-free terms is not great news for consumers, there has been a small increase in the number of interest-free balance transfer cards and purchase cards in the market. During 2019 Sainsbury’s Bank and MBNA have both had the balance transfer card with the longest introductory rate. Currently both card providers sit at the top of our 0% balance transfer charts, along with Halifax and Virgin Money - all with 29-month introductory deals.
Rachel Springall, finance expert at Moneyfacts, said: “While the pace of cuts to 0% credit card deals has slowed over the past quarter, there is still a noticeable difference with the generosity of lengthy interest-free terms compared to previous years.
“On balance transfer cards, it appears to be that the top deals have little to define them, with the top 0% deals offering a term of 29 months, the majority of which charge a 3% fee (expect for the market-leader MBNA which charges 2.75%). Traditionally, there would be much more competition with pricing balance transfer fees when the longest 0% deals sat alongside one another, but today this doesn’t seem the case. A year ago, the longest deals were offering a 0% interest-free term for 36 months and the fees varied, with the lowest set at 1.99% and the highest at 2.80% over this term.
“As it stands, borrowers not only have a shorter time to repay their debts before interest applies compared to a year ago, but they may also pay a higher upfront fee when choosing the longest 0% balance transfer cards on the market. Still, it is important that consumers consider these offers instead of incurring consecutive interest charges. If someone made a purchase of £3,000 on a typical credit card and made just £100 in repayments per month, the debt would linger for over three years and cost them £970 in interest*.
“Consumers either looking to move their debts or make a purchase still have many options to choose from, but they would be wise to scrutinise any upfront costs first. As with any debt, customers must ensure they set up a fixed repayment plan to clear their debt before any 0% offer ends.”
*Credit card repayment based on £3,000 purchase, based on an interest rate of 18.9% APR, minimum fixed repayment of £100 (thereafter a minimum of 1% plus monthly interest or £5, whichever is higher) and would take three years and four months to pay back, costing £970 in interest over this term.
Credit card market analysis
|Credit card deals||Jun 2017||Jun 2018||Mar 2019||Jun 2019|
|Longest introductory 0% purchase credit card||Sainsbury's Bank - 0% for 31 months||MBNA - 0% for 30 months||Virgin Money - 0% for 28 months||Barclaycard - 0% for 28 months|
|Average interest-free purchase term (days)||380||360||335||331|
|Number of introductory interest-free purchase deals||102||88||75||77|
|Longest introductory 0% balance transfer credit card||MBNA - 0% for 43 months, 3.29% fee||MBNA - 0% for 36 months, 1.99% fee||Sainsbury's Bank - 0% for 30 months, 3% fee||MBNA - 0% for 29 months, 2.75% fee|
|Average interest-free balance transfer term (days)||660||595||539||532|
|Number of introductory interest-free balance transfer deals||126||101||80||86|
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.