Interest free balance transfer bonanza
Andrew Hagger of Moneynet looks at the latest trends in the balance transfer segment of the credit card market.
There are now 54 credit cards offering an interest free balance transfer term of 12 months or over, the highest on record, with the average term of a 0% deal also at a new high of 12.16 months, up from 9.87 months a year ago.
Even though the economy remains in a fragile state, there are a number of factors in the card provider's favour enabling them to offer these record breaking deals.
Not only are borrowing costs very low, the Consumer Credit Directive which came into effect on 1st February this year means that lenders can be more selective as they only have to offer the best deals to 51% of successful applicants compared with the previous requirement of 66%.
With £58.2 billion outstanding on credit cards (Bank of England March 2011) there are still plentiful opportunities for card providers to pick up business from competitors.
Offering long term 0% deals is also a way to generate massive free advertising exposure via the best buy tables. The downside for consumers is that even though lower borrowing costs have enabled providers to offer extended interest free terms, once the promotional deal expires the revert to interest rates remain stubbornly high.
As well as being able to be more selective in who they lend to, card providers can also offer smaller credit limits thus enabling them to keep the cost of interest free lending to a minimum. Also if consumers happen to be late with or miss a monthly repayment, even if it is their first slip up, they will see their interest free offer terminated immediately.
The longest terms currently available are - Barclaycard Platinum 20 months, while MBNA, Virgin Money Bank of Scotland and NatWest all offer deals of 18 months.
For more information, visit moneynet.co.uk.