Andrew Hagger of Moneycomms looks at the latest trends in the UK credit card market.
Statistics released today by UK Finance revealed that £1.62 billion of credit card balance transfers took place in January – the highest value one month switch since March 2006.
While borrowers are still keen to move their debt around to save money and take pressure off their financial situation, the duration of the long term 0% balance transfer deals is still falling away.
Barclaycard is the latest lender to trim back its 0% balance transfer offer, cutting from 37 to 36 months – this means that MBNA and Nuba are now the only providers currently offering deals at 37 months interest free.
This time last year eleven major credit card companies were offering 0% terms of 40 months plus with Halifax and MBNA sharing the top spot with the longest ever recorded 0% term of 43 months.
Credit card companies are tightening their credit criteria and the appetite to be top of the long term best buys has faded dramatically.
However there is still £29.4 billion of all credit card borrowing sitting on 0% deals – that represents 44.4% of total credit card balances. There were 679,000 balance transfers recorded in January, so the level of demand from consumers is showing no sign of decline.
With inflation still stubborn around the 3% mark and further interest rate rises predicted, it’s highly likely that the best buy 0% durations will continue to dwindle in the coming weeks and months as lenders become more concerned with customer affordability.
There are some excellent card deals still available if you have a good credit rating, but if you’re looking for a long term switch (37 months 0%) or a long term low rate card such as MBNA 4.9% APR for five years, don’t hang around as such stand out deals won’t be around for much longer.
In one way it’s good that people are being smart and making good use of interest free borrowing on their plastic, but for others just getting by on a very tight budget, it’s simply a way of treading water – something that will become more challenging as borrowing rates on cards and mortgages start to rise.
- Moneycomms research reveals that only 26 of the top 50 instant access savings accounts are ‘clean’ and don’t have penalties or restrictions - February 23, 2021
- A Guide to Credit Card Balance Transfers - January 21, 2021
- Where next for NS&I customers? - October 23, 2020