Balance transfer credit cards were once a booming business for providers with intense competition pushing 0 per cent interest deals up to a bumper 43 months.
Just over a year later and the maximum number of months available with 0 per cent on balance transfers has shrunk by up to a third, according to Moneycomms.co.uk.
The top deals stretch to just 33 months now, and if they continue to shrink borrowers looking to rejig their debt in the New Year could struggle to find deals offering beyond 30 months.
On ice: Generous 0% deals once allowed borrowers to freeze interest on debts for over 40 months
It follows stark warnings from the Bank of England last year as family debts racked up to record levels prompting credit card providers to scale back their offers.
Interest-free balance transfer cards can be a great tool for those trying to pay off their debt quickly, affording extra breathing space – but only if you use them sensibly.
Using a balance transfer credit card allows you to move debt from an existing credit card, charging sky-high interest, to one with a 0 per cent interest promotion, for a small handling fee.
Historically these credit cards have been big business, a great way for lenders to sign up new customers.
Lengthy deals lulled many customers into a false sense of security, something lenders were banking on, knowing that significant numbers would incur interest in other ways or by failing to repay in time.
Figures in the past have suggested this trap catches out as many as half of customers.
The length of 0 per cent promotion periods on these cards started at just six months but has steadily grown over the years.
At the start of February last year, there were as many as 10 major credit card brands with 0 per cent balance transfer deals lasting 40 months or more.
Of the top three deals – MBNA, Halifax and Nuba (owned by MBNA) – one has been scrapped altogether and the other two now offer deals 10 months and 15 months shorter respectively.
When This is Money flagged the slow demise of the 0 per cent interest deal earlier this year, MBNA and Nuba offered the top deals at 37 months.
Now the top offers last up to 33 months from MBNA, followed by Santander and Sainsbury’s Bank at 30 months.
|Card Provider||Longest 0% BT deal at 1st Feb 2017||Longest 0% BT deal at 16th Nov 2018|
|MBNA||43 months||33 months|
|Halifax||43 months||28 months|
|Nuba (MBNA)||42 months||Brand scrapped for new customers|
|Barclaycard||42 months||31 months|
|Sainsburys Bank||42 months||30 months|
|Lloyds Bank||42 months||28 months|
|Virgin Money||41 months||31 months|
|Santander||41 months||30 months|
|AA Cards||41 months||Cards not available for new customers|
|Tesco Bank||40 months||30 months|
|Research Moneycomms.co.uk 16 November|
What effect could this have on borrowers?
Despite lenders scaling back their promotions, there are no signs of slowing in consumer credit card spending.
Recent figures from trade body UK Finance showed that a whopping £10.7billion was spent on credit cards in September – the highest single month since records began in 1997.
Around 55 per cent, or £67.8billion of outstanding debt is currently sitting on standard interest-charging cards, meaning around £30.4billion worth of debt is on interest-free deals, according to Andrew Hagger, personal finance expert of Moneycomms.co.uk.
Traditionally the new year sees a flood of borrowers vow to clean up their finances, and for most addressing their debt is a top priority.
While these borrowers will be faced with shorter terms than have previously been available, arguably 33 or even 30 months is still a considerable length of time for borrowers to clear debts.
However if the trend continues it could dramatically affect the finances of those relying on interest-free terms to make repaying hefty debts more affordable.
Experts have warned that people use these deals as a ‘crutch’ against the back drop of rising prices and slower wage growth.
Hagger says: ‘Some people will be using 0 per cent as a smart way to save money, however for others it is simply a life jacket to help them continue to tread water as they struggle to manage increasing levels of personal debt.
‘The problem is nobody knows how much of the £30billion relates to those under financial pressure – increasingly this will be an issue for these customers if long-term 0 per cent credit is suddenly no longer an option and they are faced with having to pay 20 per cent APR or more on their borrowing.’
He warns that while it may be a necessary measure for lenders to wind back these offers, it could leave those struggling the most high and dry.
Dealing with debt
If you are struggling with debt, This is Money has put together a ten step plan to help get your finances back on track.
You can also get free help from debt charities and advice websites, which have guides and factsheets or let you speak to an adviser who can help explain your options.
THIS IS MONEY’S FIVE OF THE BEST CREDIT CARDS