Balance transfer credit cards: Interest-free deals continue to increase

Balance transfer bounce back continues: Banks boost 0% terms after credit card availability hit an all-time low

  • There are now 59 balance transfer deals and 56 purchase deals available 
  • Although below pre-pandemic levels these are more than were around in 2020 
  • Banks have increased their interest-free term lengths since the start of the year
  • This suggests lenders have greater confidence in households’ finances 

Banks continue to boost interest-free credit card deals as they appear to be loosening the lending taps in the face of the UK’s vaccine rollout and recovery from the coronavirus pandemic.

Barclaycard, MBNA, Sainsbury’s Bank and Virgin Money have all increased the length of their 0 per cent balance transfer and purchase terms since January, in one case for as long as four months.

While the number of available credit card deals remains below pre-pandemic levels seen last March, availability has steadily inched up in recent months helping stimulate competition. 

There are more credit cards available than there were a few months ago

Last August saw the number of available interest-free balance transfer and purchase credit cards reach an all-time low, according to figures from Moneyfacts, as banks turned off the lending taps. 

The average length of 0 per cent deals also fell to levels not seen in half-a-decade.

But although availability remains below the 80 balance transfer deals and 75 purchase deals available in March 2019, numbers have bounced back slightly to 59 and 56 at the start of this month.

This is Money previously reported in January how some banks had boosted the lengths of their interest-free terms, and the trend has continued since then. 

Sainsbury’s Bank on 18 January increased the length of the introductory balance transfer and purchase terms on its dual credit card from 19 months to 20.

Virgin Money made a raft of changes to its cards three days later, including boosting the length of two balance transfer deals from 26 and 20 months to 28 and 24 months.

MBNA increased the length of its 0 per cent low fee balance transfer card from 24 months to 25 a week later, and Barclaycard at the start of February increased the length of its balance transfer term from 20 months to 21.

Although these adjustments are slight, it does mean consumers have more time to pay off debts or big purchases interest-free, and suggests banks have a greater appetite for lending and more confidence in the economy.

The average credit card purchase rate has also dipped from 25.2 per cent last September to 25 per cent, the same level as last March, Moneyfacts said.

And the credit reference agency Experian said the number of credit cards available on its website had increased by 13 per cent since the start of 2021, and the number of interest-free deals 22 per cent.

The latest survey from the Bank of England found lenders estimated that more households would be looking to borrow in the first three months of this year, with demand for credit cards increasing in particular.

However, households paid another £2.2billion off their credit card balances in January 2021, meaning Britain’s £56billion of outstanding credit card debt is close to a fifth smaller than it was in the same month in 2020.

It also found the availability of unsecured credit like cards and personal loans increased in the last three months of last year and was estimated to do the same in the first three months of 2021.

Amir Goshtai, from Experian, said: ‘Encouragingly, we’re seeing credit availability continuing to grow, so people have more options if they’re looking to reduce interest rates on their existing debts. 

‘Before applying for credit, it’s important to check your eligibility so you know your chances of being accepted or not without damaging your credit score.’