Banks have brought back or boosted balance transfer deals over the last month as they loosen the lending taps, but borrowers looking to clear their de
Banks have brought back or boosted balance transfer deals over the last month as they loosen the lending taps, but borrowers looking to clear their debts still have less choice than ever before.
MBNA, Sainsbury’s Bank and Virgin Money all lengthened the interest-free terms on some of their cards, while the supermarket lender also reopened its doors to non-Nectar customers last October after shutting up shop at the start of April 2020.
It now offers the best 0 per cent deal on the market, with borrowers having as long as 29 months to clear their debts in return for a 3 per cent, although some applicants will be given less time to repay.
Those looking to move their debts over to an interest-free deal could benefit from banks recently increasing their 0% term lengths
Meanwhile MBNA increased the length of interest-free balance transfer terms on two of its cards from 18 and 26 months to 20 and 28, respectively, while it also reduced the balance transfer fee on its 28-month 0 per cent deal from 2.99 to 2.79 per cent.
The moves potentially suggest lenders have a greater appetite for new business amid greater confidence in the recovery of the UK economy.
The credit reference agency Experian told This is Money there were almost double the number of credit cards available on its website as there had been when availability was at its lowest, during the initial lockdown.
It said more card providers had joined over the last month, although banks denied the moves were anything out of the ordinary.
‘It’s encouraging that while demand has grown, lenders have also been able to continue offering a diversity of credit products’, Experian’s Amir Goshtai said.
‘This suggests positive signs for the UK credit economy, especially when compared to the first lockdown.’
However, TSB reduced its previously market-leading 0 per cent term from 29 months to 28 on Wednesday, while its slightly lower fee of 2.95 per cent means the best balance transfer deal has gotten slightly more expensive.
Sainsbury’s Bank also upped the cost of a balance transfer to its 26-month low fee card from 1.85 per cent to 2 per cent of the amount being moved.
|Bank||Old deal||New deal||Date of change|
|Sainsbury’s Bank||Balance transfer credit card: 28 months interest-free on balance transfers
26-month low balance transfer fee credit card: 25 months interest-free on balance transfers – fee of 1.85%
Dual credit card: 20 months interest-free on balance transfers and purchases
18-month low balance transfer fee credit card: 18 months interest-free on balance transfers – no fee
|29 months interest-free
26 months interest-free – fee upped to 2%
Interest-free term for balance transfers and purchases reduced to 19 months
Fee increased from 0% to 0.5% in some cases
|MBNA||0% transfer credit card: 18 months interest-free on balance transfers and purchases – BT fee of 2.75%
Long 0% balance transfer credit card: 26 months interest-free – fee of 2.99%
|20 months interest-free – fee upped to 2.99%
28 months interest-free – fee reduced to 2.79%
|TSB||Platinum balance transfer credit card: 29 months interest-free on balance transfers – 2.95% fee||28 months interest-free||6 January|
|Virgin Money||Balance transfer credit card: 25 months interest-free on balance transfers
All-round credit card: 18 months interest-free on balance transfers and purchases
|26 months interest-free
18 months interest-free on balance transfers and purchases
And despite these recent improvements, the availability of interest-free credit card deals also remains at an all-time low.
There were 55 balance transfer deals available on Moneyfacts on Friday, down from 60 at the start of December and 75 in December 2019. And in January 2017 banks offered borrowers as much as 43 months interest-free to repay their debts.
What are the best deals?
Sainsbury’s Bank now offers the longest balance transfer deal, with 29 months interest-free available from the date the card is issued. It charges a fee of 3 per cent on the amount transferred with a minimum of £3.
The minimum payment each month is 2.25 per cent of the statement balance, or £5, whichever is higher, while it also offers 0 per cent interest-free on purchases for three months and a representative APR of 21.9 per cent.
The number of available 0 per cent purchase cards is also close to an all-time low, with just 54 available, and the longest available term is offered by Santander.
Its All in One Credit Card Mastercard comes with a fee of £3 a month, but offers 26 months interest-free on purchases and 0.5 per cent cashback on all purchases. It has a representative APR of 21.7 per cent and also offers 26 months interest-free on balance transfers.
Banks usually adjust their term lengths in January as they jostle for new business, with households often looking to reduce the cost of Christmas spending, but there have been fewer moves this year than usual, according to Moneyfacts.
The slight resurgence in balance transfer deals comes after banks tightened the availability of unsecured credit like credit cards and loans between July and September last year and were expected to do so again in the final three months of the year, according to a survey of lenders by the Bank of England.
‘Borrowers who use a 0 per cent deal would also find the time to repay before interest applies has shortened, so they be more inclined to pay back debts sooner than they would have years ago’, Moneyfacts’ Rachel Springall said.
Britons have largely shunned their credit cards over the last 12 months during coronavirus lockdowns, with record amounts of personal debt repaid since the first one in March.
Another £900million of credit card debt was paid off in November, according to the Bank of England, while just 53.9 per cent of credit card balances were bearing interest in September, according to trade body UK Finance.
Those borrowers who are struggling with debts can apply for a payment holiday on their credit card or personal loan lasting up to six months, provided they have not taken a payment break.
They must apply by the end of March 2021 and all payment holidays will come to an end in July.
‘It’s a positive sign that card debt is being repaid but there may well still be those out there struggling with debt and they should seek advice of a debt charity if they need help’, Rachel Springall added, while those with a bad credit history are unlikely to be accepted for the longest interest-free terms available on the market.
The small print: Read this before applying
Being approved for a balance transfer card is by no means guaranteed.
In theory, those with the best credit ratings are the most likely to be approved for a card as they will have a history of paying off debt on time.
It is more probable that those with poor credit ratings will be rejected or be given less attractive terms such as a higher interest rate or shorter interest-free period.
Those who are refused should bear in mind that applying for a number of other balance transfer cards in a short space of time will worsen their credit rating.
Many card providers will not allow you to transfer balances from another of their own products, so you should identify the best deal for you outside of your existing provider before making an application.
Some providers may only accept your application if you already hold a current account with them.
There are other restrictions such as having a minimum level of income – generally between £10,000 and £20,000.
To take advantage of introductory 0 per cent offers, you may have to transfer your balance within a specified time frame.
Most credit card providers increase handling fees after the first 60 or 90 days.
What about a no-fee card?
Borrowers happier to pay off their balance in a short period of time may also wish to consider a balance transfer card which does not come with a fee.
There are fewer available than last year but there are still seven available deals, although This is Money is only including those cards which do not come with fees themselves.
Of the five without fees, the longest terms are offered by Sainsbury’s Bank and Santander and come with 18 month interest-free terms.
|Credit card||Representative APR||Interest-free term length||Minimum payment|
|Santander Everyday Credit Card Mastercard||18.9%||18 months||1% or £5 a month|
|Sainsbury’s Bank 18 Month Low Balance Transfer Fee Credit Card Mastercard||21.9%||18 months||2.25% or £5 a month|
|Barclaycard Platinum 15 Month No Fee Balance Transfer Visa||21.9%||15 months||2.25% or £5 a month|
|Danske Bank Standard Mastercard||22.9%||5 months||3% or £5 a month|
|TSB Advance Credit Card Mastercard||7.9%||3 months||1% or £5 a month|
Sainsbury’s Bank’s Low Fee card may however charge you 0.5 per cent in some instances, while it comes with 0 per cent interest-free on purchases for three months and an APR of 21.9 per cent – although, most use a balance transfer card to shift and pay off debts, rather than add to it.
Meanwhile Santander’s Everyday Credit Card Mastercard has an APR of 18.9 per cent and also offers 0 per cent interest-free on purchases for three months.
Its 18-month term starts from the date of the transfer, as opposed to Sainsbury’s card which starts from the date the card is issued.
The trade-off means that in return for no fee borrowers’ have less time to pay off the balance, meaning higher payments each month.
|Balance being transferred||Balance transfer fee with Sainsbury’s Bank||Monthly repayment required with Sainsbury’s Bank to clear the balance in 29 months||Monthly repayment required with Santander to clear the balance in 18 months|
We compared how much extra this would cost compared to the longest term available on the market, which is 29 months from Sainsbury’s with a 3 per cent fee, if borrowers wished to transfer £3,000, £5,000 or £10,000.
Sainsbury’s turns £3,000 into £3,090, £5,000 into £5,150 and £10,000 into £10,300, but cuts the required payments by £63, £105 and £211 a month, respectively.