More than 20 interest-free balance transfer credit cards have been withdrawn since the start of the year, so borrowers looking to shift credit card debt shouldn’t hang around.As the name suggests, a balance transfer credit card enables you to transfer any existing credit card balances you have onto it, reducing the amount of interest you pay.
They usually offer a 0% introductory rate for several months, or a consistently low interest rate. This means you can either pay back what you owe interest-free, or at a much lower rate than you were previously paying. Lenders have withdrawn 22 balance deals so far this year, according to financial website Moneyfacts.co.uk, with the number of balance transfer cards currently at a record low of 54 deals.
Rachel Springall, finance expert at Moneyfacts.co.uk, explained: “The number of offers available to consumers has dropped since the start of 2020 and the fall echoes that seen during the past recession.
“Typically, credit card providers would rein in lucrative offers during a period of economic uncertainty so that they are not taking on too much risk. As experienced during the recession between 2007 and 2009, credit card providers pulled interest-free balance transfer cards and, since the start of January, the market has already felt a similar contraction thanks to the impact of the Coronavirus pandemic.”
28-month 0% deals still available
The good news is that there are still some competitive deals available. For example, Marks & Spencer’s Bank Transfer Plus Mastercard offers an introductory 0% on balance transfers for 28 months. TSB also offers 28 months at 0% with its Platinum Balance Transfer Mastercard. Make sure you pay off your balance within the interest-free period, however, as after theses finish, rates on these cards shoot up to a representative annual percentage rate of 19.9%.
Don’t delay if you want to take advantage of a competitive balance transfer card, as current deals may not be around for long. Andrew Hagger, of Moneycomms.co.uk said: “For borrowers who have been shifting balances from card to card over the last few years, the choice of new deals and length of deals are dwindling on a weekly basis and many may struggle to switch again when their current 0% deal expires. The way the market is moving, these deals could well be trimmed back in the coming weeks.”
If you’re considering a balance transfer card, remember to factor in balance transfer fees. Marks & Spencer’s card, for example, has a 2.85% balance transfer fee, whilst TSB’s card has a 2.95% fee. You can find cards with lower balance transfer fees, or ones with no transfer fee at all, but these will usually have a shorter 0% introductory period.Ms Springall said: “At the moment there are a handful of offers that do not charge a balance transfer fee at all, such as the 20-month 0% interest-free offer from NatWest, and if borrowers are able to clear a £3,000 debt within this timeframe, they would save themselves £69.60 based on the average balance transfer fee today.”