Top balance transfer offers worsen as terms shorten

Meanwhile, the average credit card purchase APR has reached a record high.

Top deals for balance transfer credit cards have worsened, according to the latest analysis by Moneyfactscompare.co.uk.

In August 2023, the best 0% balance transfer card offered a 30 month interest-free period, which declined to 29 months in January 2024 and has now dropped to 28 months as of August 2024.

This comes after Tesco Bank recently reduced its market-leading 0% balance transfer offer from 29 months down to 27 months, while Virgin Money cut its own 28-month offer to 26 months.

As a result, consumers looking to manage any credit card debt may now find themselves with less time to pay off their balance before facing steep interest charges.

However, there are still competitive 0% balance transfer cards available that could help consumers minimise the interest they pay on their credit card debt.

“Consumers looking to consolidate their credit card debts would typically turn to a 0% balance transfer offer, particularly when their existing debt is incurring interest at a high rate,” explained Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

“Those who do use these deals will usually have to pay a balance transfer fee, so it’s wise to keep this in mind if debts are going to be moved around often over the short-term,” she continued.

Borrowing costs at record high

Even though the 0% period on balance transfer cards has dropped, consumers may be encouraged to see that the top 0% purchase term held at 21 months, where it has been since January 2024.

A 0% purchase credit card allows consumers to spend without paying interest for a fixed period, making it useful for covering large expenses. Provided you make minimum payments and pay off the full balance before the term ends, you won’t pay any interest on the card.

However, those without an interest-free deal on their existing card will find the average purchase APR on a credit card has reached 35.6% APR - its highest point since Moneyfacts electronic records began in June 2006.

Managing your card

With the summer coming to an end, many people will now be facing added expenses.

Whether you’ve been on holiday, made home improvements, or had to make an emergency expense, using a credit card may have helped to initially cover the cost.

“An interest-free purchase card is a convenient choice to cover any of these scenarios, but borrowers should always aim to make more than the minimum repayment each month and have a plan in mind to clear the debt before their 0% offer ends,” Springall added.

It’s important to keep on top of any credit card debt, and to let your provider know as soon as possible if you’re struggling to make repayments.