0% balance transfer deals getting sweeter for consumers

By UK CreditCards.com

The longest 0% balance transfer period offered by a UK credit card is currently 24 months, double the longest offer available five years ago, says a new study.


Analysis by financial research firm Defaqto has revealed that, despite an increase in average credit card APRs since July 2006, Britons who compare credit cards with the aim of transferring an existing balance are likely to find a good deal -- if they have a high enough credit rating.

Other introductory offers, such as 0% on purchases for a set number of months, have also become more attractive in recent times, says Defaqto.

APRs are higher, but promotional offers are sweeter
Average credit card APRs have increased from 15.8% to 18.4% since July 2006, according to Defaqto's analysis. However, those who shop around for a good introductory offer and take a sensible approach to their card use can still get a good deal, say experts.

For instance, while the longest 0% balance transfer period in July 2006 was just 12 months, those applying for the Barclaycard Platinum with Balance Transfer card can now enjoy 0% on balance transfers for 24 months (with a 2.8% fee).

There has also been an increase in the actual number of credit cards that offer 0% introductory balance transfer periods over the past five years, from 145 to 161. However, consumers who are considering this type of card should remember to take into account the fee charged when transferring a balance, as the average fee has risen from 1.81% in July 2006 to 2.91% in July 2011.

Better deals also available with 0% purchase cards
Another type of credit card that could be beneficial to some consumers is a 0% purchase card, as these allow cardholders to avoid accruing interest on purchases for an extended period.

According to Defaqto, the longest duration of any 0% introductory purchase rate is currently 15 months, which is now offered by the Marks & Spencer credit card and the Tesco ClubCard credit card. There has also been an increase in the number of credit cards offering 0% on purchases. Consumers who are looking for this type of card now have 146 to choose from, compared with just 75 cards in July 2006.

Defaqto: 'Very attractive offers' available -- for consumers with good credit
David Black, Defaqto's insight analyst for banking, said there are currently some "very attractive offers" available to those with excellent credit. 

"Those with good credit ratings have a real incentive to change their credit card on a regular basis and should ensure that they choose a card that matches their likely usage," said Mr Black. "In addition, it is unusual to find one credit card that offers the best deal for all types of usage. For this reason, people able to get credit cards may find it beneficial to have more than one credit card and use each for a specific purpose to take advantage of the best features of that card."

However, consumers need to protect their credit history in order to benefit from the most attractive deals. 

"As an individual's credit blemishes increase, it becomes increasingly difficult to get the credit cards with the most attractive standard interest rates -- because of the widespread use of personal pricing -- and, as credit records deteriorate further, even to get a credit card at all," explained Mr Black.

See related: Balance transfer credit cards: What to consider first; Card users to transfer £2.8 billion in 2011

Published: 29 July 2011