- Offer length has decreased for interest-free credit card deals, the longest 0% balance transfer offer has dropped to 29 months
- Introductory balance transfer credit card fees have increased, with the average balance transfer fee now 0.33% more than 2 years ago
- The longest 0% balance transfer offer at 29 months has a fee of 3.45% which may not be the right choice for all
With the festive season at a close, many people have accrued Christmas-related debt and are looking for ways to manage this in the new year. Transferring this debt over to an interest-free credit card is one way to do so and there are an increasing number of options available. However, the average offer length has decreased and introductory balance transfer fees have increased in the last two years. This is according to new analysis1 from Defaqto, one of the UK’s most trusted sources of financial product and market intelligence.
0% balance transfer credit cards work by taking on existing debt from other credit cards, without charging interest. The interest-free period will usually be limited to a set timeframe after which the debt will accrue interest. These deals can be ideal for those who are paying interest on an existing credit card or cards and need more time to repay it.
The longest 0% balance transfer offer has dropped below 30 months to 29 months. This is four months less than a year ago (33 months in 2023) and six months less than two years ago (35 months)2. Those with a large balance to pay off will be looking for long interest-free periods, but these nearly always come with a fee. The longest 0% balance transfer offer at 29 months has a fee of 3.45% which may not be the right choice for someone who has a smaller balance to transfer.
Whilst the number of deals available to consumers has increased in the past two years, the fee to transfer the balance has also increased. The average balance transfer fee is now 0.33% more than two years ago, increasing from 2.43% in January 2022, to 2.76% in January 2024. A change of even just 0.33% can add substantially to outstanding debt and is only really worth considering for those who need a longer repayment period.
Alongside fee increases, the average offer length of deals has reduced and is now 17 months compared to 19, which it has been at for the past two years. Plus, the longest 0% balance transfer offer with no fee has now reduced from 22 months a year ago to 14 months today.
The latest data from The Money Charity3 shows that the average amount of debt held by adults in the UK has increased again over the past year, from £2,252 in 2023 to £2,400. Based on this figure and the best buys list released by Defaqto (see table below), it would cost someone nearly twice as much in fees for an additional few months. For example, Barclaycard’s 3.45% over 29 months fee would be an additional £82.80 compared to the Bank of Scotland’s 1.99% over 22 months fee which would be £47.76. This is why it is worth considering how long you would need to clear the balance and choose the most suitable card for your needs. A card which offers a slightly smaller number of months but has a lower fee could be more cost-effective depending on the balance to transfer.
Although Barclaycard are currently offering a £20 cashback when at least £2,500 is transferred to their Platinum Transfer card within 60 days of opening the card (available until 8th February) which could make it more worthwhile paying the higher fee.
There are also some very long balance transfer deals with lower fees, which may be a better option for those who have a sizeable balance but will be able to clear it in 22 months or less.
Here are the best buys currently available without a fee:
0% Balance Transfer with no fee
|
Provider |
Product |
Duration of Balance Rate (Months) |
|
NatWest |
Balance Transfer Credit Card |
14 |
|
Royal Bank of Scotland |
Balance Transfer Credit Card |
14 |
|
Barclaycard |
Platinum Balance Transfer |
12 |
|
Santander |
Everyday No Balance Transfer Fee Credit Card |
12 |
Here are the best buy balance transfer deals with lower fees:
0% Balance Transfer with a low fee (fee 2% or less)
|
Provider |
Product |
Introductory Balance Transfer Fee (%) |
Duration of Balance Rate (Months) |
|
Bank of Scotland |
Low Fee 0% Balance Transfer Credit Card |
1.99% |
22 |
|
Lloyds Bank |
Low Fee 0% Balance Transfer Credit Card |
1.99% |
22 |
|
MBNA Ltd |
Low Fee 0% Balance Transfer Credit Card |
1.99% |
22 |
|
Barclaycard |
Platinum Balance Transfer |
1.99% |
20 |
|
Virgin Money |
Balance Transfer Credit Card |
2% |
20 |
Here are the best buy balance transfer deals with a fee:
0% balance Transfer with a fee
|
Provider |
Product |
Introductory Balance Transfer Fee (%) |
Duration of Balance Rate (Months) |
|
Barclaycard |
Platinum Balance Transfer |
3.45% |
29 |
|
M&S Bank |
Transfer Plus Credit Card |
3.49% |
28 |
|
HSBC |
Balance Transfer Credit Card |
3.49% |
27 |
|
MBNA Ltd |
Long Balance Transfer Credit Card |
3.49% |
27 |
Advice on credit checks
Applying for a new credit card, even to just transfer an existing balance, will usually require a credit check. These checks can leave a footprint on your credit file, which can make it more difficult to get credit in future. Use a credit report site for example MSE Credit Club, Clearscore or Credit Karma to check which card you are more likely to be eligible for and then use the eligibility check before applying for the card so there is no unnecessary hard credit check which could affect your ability to apply for credit in the future. More lenders are now offering eligibility checks that allow people to see if they would be accepted for the credit card before they apply, so they won’t get a mark on their file if their initial application is unsuccessful. All credit cards that have been given a Defaqto 5 Star Rating give customers this option.
Katie Brain, Consumer Banking Expert at Defaqto, said:
“The past few years have been financially challenging for Brits, with additional pressures following spending over the festive period. Transferring any outstanding debts to a 0% balance transfer credit card can offer consumers some much-needed breathing room when it comes to managing this debt. However, you should always weigh up each option before committing to a new deal.
“Whilst balance transfer cards can help many get back or remain on track financially, be mindful of any monthly or annual fees which may apply to some cards which have a 0% balance transfer offer. Consider your individual situation, looking at both fees and offer length to see which is the best fit. Otherwise, you may end up paying more in the long run when your introductory deal comes to an end.
“For anyone who is struggling with debt and is not sure what is right for them, it is worth talking to the Money Advice Service, for free and independent guidance.”
Defaqto maintains the UK’s most comprehensive financial product database, providing independent expertise, insights, tools and technology to help everyone make smarter financial decisions, and has put together the following product recommendations based on products available on 8 January 2024.