0% Balance Transfer terms continue to slide – worry for consumers as credit card interest free durations shrink by up to a third

Andrew Hagger of Moneycomms looks at the continuing decline of 0% balance transfer durations.

At the beginning of February 2017 there were 10 major credit card brands jostling for best buy status all offering 0% interest terms of 40 months or more.

Those days are now long gone and as we approach the new year, the traditional time for people to re jig their card debt, the longest interest free terms are down by between 25% and 33%.

If the trend continues borrowers may find that even securing a 30-month term come January may not be possible.

Card ProviderLongest 0% Balance Transfer term 1 Feb 2017Longest 0% Balance Transfer term 16 Nov 2018
MBNA43 months33 months (1.99% fee)
Halifax 43 months28 months (1.59% fee)
Nuba (MBNA)42 monthsBrand scrapped for new customers
Barclaycard42 months31 months (1.45% fee)
Sainsbury's Bank42 months30 months (1.50% fee)
Lloyds Bank42 months28 months (1.50% fee)
Virgin Money41 months31 months (0.85% fee)
Santander41 months30 months (no BT fee)
AA Credit Cards41 monthsCards not currently available for new customers
Tesco Bank40 months30 months (2.69% fee)
Correct as at 16.11.2018

According to the latest credit card market data from UK Finance, only 55.1% of the £67.8 billion of outstanding credit card balances are being charged interest – that means around £30.4 billion is on interest free deals.

Lloyds Banking Group dominates the balance transfer sector with its MBNA, Halifax and Lloyds Bank brands and has been responsible for some of the most severe 0% cuts.

Some people will be using 0% as a smart way to save money, however for others it is simply a life jacket to help them continue to tread water as they struggle to manage mounting levels of debt.

The problem is nobody knows how much of the £30 billion ‘free borrowing’ relates to those under financial pressure – increasingly this will be an issue for these customers if long term 0% credit is suddenly no longer an option and they are faced with having to pay 20% APR or more on their borrowing.

The credit card providers appetite for new customers has driven the 0% culture and is something that may end up coming back to haunt them.

2 Comments on 0% Balance Transfer terms continue to slide – worry for consumers as credit card interest free durations shrink by up to a third

  1. The trend is interesting, however another important variable is the fee. Some deals before had 0% fee for the transfer, I think now there are no such deals left?

    Secondly, the phrase “around £30.4 billion is on interest free deals.”, Might not be right. It isn’t clear if the amount not paying interest is on 0% BTs, or they are simply transactors which historically make up 50% of card debt. Not balance transfers.

    • Hi Kevin
      You’ve got a valid point re the balance transfer fee – it has always been tricky for the customer to select the best deal factoring in both the term and fee. I’ve updated the table to show the fees for the current best buys and as you’ll see they vary quite a bit.
      There are still some balance transfer deals with no fee such as Santander 27 months and Sainsbury’s Bank 26 months – both with zero fee.

      With regards the amount of money not being charged interest, it’s not been possible to get a detailed breakdown of how this figure is made up, however, the UK Finance credit card stats show between £1 billion and £1.2 billion of balance transfers made every month, so I think it’s safe to say that there’s every possibility there could be £20 billion plus sitting on 0% deals.

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