Debt management credit card deals growing

New research by Defaqto has found that there are 14% more interest-free balance transfer deals on the market now compared to this time last year (75 vs 66 in 2022). The longest balance transfer deal without a fee has also improved to 22 months, compared to 21 months a year ago.

Defaqto says that balance transfer credit cards can offer a lifeline for those struggling financially. Moving a credit card balance to an interest free deal can be a great way to manage debt, and there’s an increasing number of deals on the market, new analysis from Defaqto, the independent financial information and ratings experts, shows.

Those with a large balance to pay off will be looking for the longest interest-free periods, but these nearly always come with a fee. Despite there being more choice for consumers, balance transfer fees have started to rise with some card fees increasing by more than 2% in the past quarter. The average fee for transferring a balance to a fee-charging card is 2.65%, (compared to an average 2.42% last year) which can add substantially to outstanding debt and is only really worth considering should you need a longer repayment period.

Although there are more deals to choose from, the average offer length for deals with a fee has reduced. The average length of offer (for deals with a fee) is now 19 months compared to 20 last year. Just five cards now offer 30 months or more interest free (with an introductory fee) compared to eight cards  at the start of 2022.

Katie Brain, Consumer Banking Expert at Defaqto, said “Rising inflation and soaring interest rates will have left many households worried about their credit card balances. It’s an extremely difficult time financially right now for many, so transferring outstanding debt to a 0% balance transfer credit card can be an effective way of getting your finances back on track for anyone grappling with credit card debt.”

“Whilst balance transfer cards can offer some welcomed breathing space, borrowers should always make a note of when the offer period comes to an end as these 0% rates are only introductory.  Those who don’t manage to clear their balances in this time may be in for a nasty shock when their 0% rate reverts to a costly AER, which could be as high as 34.94%.”

“Bank of England data shows the annual growth rate of credit card borrowing rose from 11.5% in October to 12.2% in November last year, with individuals borrowing an additional £1.5 billion in consumer credit in November, on net, following £0.7 billion of borrowing in October. With this in mind, we suggest customers shop around for the best Balance Transfer card they are eligible for. Where there is the option to check your eligibility before applying, this is worth doing as the best deals on the market tend to only be available to those with an excellent credit rating. It is also important to check if there is a fee with the card as that could eat into any introductory offer. Start by looking at the bank you have a current account with as sometimes there are lower fees for balance transfer cards with your existing bank.”