2014 Credit Card Balance Transfer War kicks off early

Andrew Hagger of Moneycomms.co.uk looks at the prospect of an early New Year scramble for credit card best buy coverage as MBNA muscles in on Barclaycard for top spot with a new 29 month 0% balance transfer promotion launched today.

With the latest Bank of England statistics showing that total credit card borrowing in the UK now stands at £57.1 billion (as at October 2013) card providers will continue their quest for new switchable balances in the coming months.

The new deal from MBNA is likely to provoke a swift response from Barclaycard and possibly Halifax, Tesco Bank and NatWest, some of the most competitive players in the balance transfer segment of the credit card market.

It’s almost certain we’ll see interest free terms breach the 30 month mark again in a market where the average 0% promotional term just keeps growing.

The average 0% balance transfer term 4 years ago was 9.7 months; in 2011 it had risen to 12.1 months and today stands at 14.2 months with more than a dozen cards offering an interest free term of two years or more.

Every £1000 you carry over on a credit card at the average rate of 17.1% APR costs approximately £14.25 in interest per month so it’s a no brainer to switch those stubborn balances as long as your credit record is in good order.

There’s always danger that some consumers will focus purely on the length of the interest free incentive, even though they may not require or intend using the full 24-29 month 0% term on offer.

Although the potential interest savings are greater the longer you borrow at zero per cent, if you know you can pay the balance of sooner it makes sense to opt for a shorter term deal as they often come with a much lower balance transfer fee.

In the tables below you’ll see the cost of switching £4,000 to the Barclaycard 29 month deal is £111.60 and the latest MBNA 29 month deal at £115.60, but if you know you have sufficient funds to clear your debt within 12 months for example, the 0.75% balance transfer fee from Fluid will mean your one off balance transfer fee is just £30.

 

Credit cards with longest 0% introductory term for balance transfers

Provider 0% term Balance Transfer Fee BT fee cost for £4,000 BT fee cost for £7,000
Barclaycard 29 months 2.79% £111.60 £195.30
MBNA 29 months 2.89% £115.60 £202.30
Barclaycard 28 months 2.39% £95.60 £167.30
Halifax 28 months 2.45% £98.00 £171.50
Tesco Bank 28 months 2.90% £116.00 £203.00
Research by Moneycomms.co.uk 23.12.2013

 

 

Credit cards with lowest BT fee for 0% balance transfers

Provider 0% term Balance Transfer Fee BT fee cost for £4,000 BT fee cost for £7,000
Fluid 12 months 0.75% £30.00 £52.50
Halifax 15 months 0.80% £32.00 £56.00
Lloyds Platinum 15 months 0.80% £32.00 £56.00
Tesco Bank 12 months 0.85% £34.00 £59.50
MBNA Everyday 18 months 1.50% £60.00 £105.00
Research by Moneycomms.co.uk 23.12.2013

 

ENDS

 

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