Balance transfer deals are disappearing, act now to shift debt

With payment holidays coming to an end and personal debt increasing, Defaqto, the independent financial information and technology experts, have analysed the market to see what is out there to help borrowers manage their debt.

According to The Money Charity, the average person in the UK owes £539 more now than they did a year ago. Credit cards and overdrafts can be great ways of accessing credit in the short term. However, over time, these debts can become expensive with the interest and charges mounting up. For anyone in debt, it is worth reviewing the cost of their existing borrowing against some of the deals on offer as they may be able to save money by simply moving the debt elsewhere.

One of the most popular ways of reducing the cost of credit card debt is to transfer the balance to a new credit card. In the past, many credit card providers have offered 0% interest balance transfer deals, allowing the borrower to move their existing debt to them without paying any interest on the debt for a fixed period. Typically, there is a fee for doing this, but it can be cheaper than paying the interest with the old provider.

However, these deals are disappearing from the market with just 66 cards available today compared to 91 in March before lockdown and 94 a year ago, leaving borrowers with less choice. Not only are the deals disappearing but the amount of time you can pay no interest on the balance is also falling. Today the longest balance transfer offer is the TSB Platinum Balance Transfer card, with 29 months at 0% interest. 2 year’s ago, the longest interest-free period was 34 months and there were 46 cards offering 0% balance transfer for 20 months or more - today there is only 27.

There are a handful of 0% balance transfer cards which do not even charge a fee for taking on the existing debt. The Santander Everyday Credit Card has no transfer fee and offers the longest interest-free period with no fee on the debt at 18 months. The Sainsbury’s Bank No Balance Transfer Fee credit card also does not charge a fee and no interest on the debt for 18 months but is only available to Nectar cardholders (Nectar card held for minimum 6 months). The TSB Advance card and the Danske Bank standard credit card also offer fee-free transfers but borrowers will be charged interest on the debt after 3 and 5 months respectively.

Unsecured loans can be a better way to consolidate expensive credit card debt if you owe more than £7,500 and can’t get a 0% balance transfer credit card. Unlike the credit card market, there are still plenty of personal loans and the interest rates are still very low. Today the best rate on the market is 2.80% by Cahoot or TSB.

For anyone applying for new credit, it is important to remember that lenders will search their credit file and may leave a mark, which could put off other lenders. Some of the best deals are only available to those with an excellent credit rating and borrowers will not know this until after they have applied. Many organisations offer eligibility checks now, which allow a borrower to check if they will be accepted for credit before they apply without leaving a mark on their file.

For those who are struggling with their debt but aren’t able to move to a new deal, it is worth talking to their lender in the first instance as they may be able to help. Borrowers can also access free, independent advice through the Money and Pensions Service and the Citizens Advice Bureau.

Katie Brain, Banking Expert at Defaqto, says: “It is easy for the cost of borrowing to creep up, especially if you have a credit card with an introductory offer, which has finished.  There aren’t as many deals available now and they are disappearing fast, so it is worth checking to see if you can get a better rate with a new provider. It is possible to slash hundreds of pounds off the cost of your debt, simply by switching to a new deal, but you may need to move quickly to get one. Always see if you can do an eligibility check first, so it doesn’t affect your credit rating.”