Consumers relying on balance transfer credit cards are being given less time to pay off their debts, as new data shows interest-free deals are now significantly shorter than 12 months ago.
A balance transfer credit card allows you to move your debts to a card with 0% interest, although this only lasts for a set time. But the longest deals available now offer just 32 months interest-free -five months less than last year.
We examine what this means for people with credit card debts and look at the best 0% balance transfer credit card deals on the market.
A typical fee might be 2.0%, which on a £2,000 debt would come to a payment of £40.
This means your entire monthly payment will go towards repaying your debt, rather than servicing interest, giving you a better chance of clearing your balance.
A customer with a £2,000 debt on a card charging 18.9% APR and paying £60 a month could save £755 - and clear the money owed a year earlier - if they switched to a 0% balance transfer card.
A longer-lasting 0% balance transfer deal gives you more time to freeze the debt and make affordable repayments.
But this represents a significant drop over the past two years: the longest period available in March 2017 was 43 months, while this time last year you could get up to 37 months.
The fall in the 0% transfer term could be a reaction by credit card providers to the Financial Conduct Authority's recommendation last year that lenders encourage customers to pay back debts faster.
When searching for a good 0% balance transfer deal, you should consider the length of the no-interest period and the size of the transfer fee. If there's a risk you won't pay off the card during the 0% period, you'll also need to consider how much interest will be payable from that point onwards.
|Balance transfer credit card||0% balance transfer deal||Balance transfer fee||Representative APR (variable)||Which? Customer score|
|Post Office Money||32 months||2.00%||19.9%||70%|
|HSBC Advance||32 months||1.30%||21.9%||65%|
|HSBC 32 month||32 months||1.40%||21.9%||65%|
|Tesco Bank||30 months||2.69%||18.9%||72%|
|Sainsbury's Bank||30 months||3.00%||19.9%||69%|
Source: Which? Money Compare
But if you want to avoid paying money upfront just to set up the card, here are the best fee-free balance transfer deals available right now.
|Card||0% balance transfer deal||Representative APR (variable)||Balance transfer fee|
|Tesco Bank Clubcard||20 months||19.9%||n/a|
|Sainsbury's Bank No Balance Transfer Fee Card||22 months||19.9%||n/a|
|Barclaycard Platinum 20-month Balance Transfer Credit Card||20 months||19.9%||n/a|
Source: Which? Money Compare
It's essential to pay the minimum amount on your transfer credit card as most companies reserve the right withdraw a deal at any time if you miss a payment.
Ideally you should look to pay more than the minimum amount to clear the debt sooner. Paying only the minimum amount each month for long periods can have a negative impact on your credit score because it may appear you're struggling with the debt.
You should beware of spending on a balance transfer card, because those which offer 0% interest on purchases do so for a limited time.
If you still have debt at the end of the 0% period, customers could be best advised to switch the remaining amount to another balance transfer card.
You can work out which balance transfer deal might be best for you by using our calculator below.
Please note that the information above is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.