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 Provider||Longest 0% Balance Transfer term 1 Feb 2017||Longest 0% Balance Transfer term 16 Nov 2018|
|MBNA||43 months||33 months (1.99% fee)|
|Halifax||43 months||28 months (1.59% fee)|
|Nuba (MBNA)||42 months||Brand scrapped for new customers|
|Barclaycard||42 months||31 months (1.45% fee)|
|Sainsbury's Bank||42 months||30 months (1.50% fee)|
|Lloyds Bank||42 months||28 months (1.50% fee)|
|Virgin Money||41 months||31 months (0.85% fee)|
|Santander||41 months||30 months (no BT fee)|
|AA Credit Cards||41 months||Cards not currently available for new customers|
|Tesco Bank||40 months||30 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.
- Fixed rate savings – best buy rates edging upwards - September 17, 2020
- 0% Credit Card Balance Transfer terms on the slide since lockdown - July 13, 2020
- Mainstream credit card rates unchanged in 2020 – for now - June 16, 2020