In May 2017, you can get a 43 month 0% balance transfer deal if you pay a hefty fee. Or you can get a 28 month deal with no fee at all! The offers from the banks keep getting better – longer and cheaper. If you have a good credit rating, there has never been a better time to refinance expensive credit card debt.
The number of balance transfers is huge. In March 2017 there were over 600,000 balance transfers in Britain, adding up to more than a billion and a quarter pounds. This is big business, so read How banks make money from 0% cards and make sure you don’t get caught out … because that is what the banks expect will happen to a lot of their customers.
In contrast, there are now a lot fewer cash back offers than 18 months ago and the amount of cash back paid on the remaining cards is lower.
Lenders compete to offer the best 0% credit card deals
At the moment several lenders including MBNA, Barclaycard and Halifax are fighting to be on top of these tables. Many of the deals are now complicated with “little extras” being thrown in – cash back, Nectar points, M&S vouchers etc.
The following offers were all available in early May 2017, check MoneySavingExpert for the most recent news:
- the longest 0% period: MBNA is offering up to 43 months with a fee of 3.29% (also 43 months on its Nuba brand, with a higher fee but an Amazon voucher – do the maths to see if you will gain from this!)
- nearly as long but a much lower fee: Sainsburys has 42 months at 0% with a fee of 2.3%. For only 1 month less, this is a much better all round offer than the MBNA offers above – not only is the fee lower but Sainsburys offer the headline 42 months to everyone they approve, it’s genuine.
- best low fee deal: Barclaycard offering up to 37 months at 0%, with a fee of only 1.4% – that is a big saving over the cards offering 40 months plus!
- top no fee deal: Sainsburys at 28 months. (TSB also offer a 28 month no fee deal, but there you may get offered a shorter term.)
So what’s the catch?
There are four problems with these great-sounding credit card deals:
- your credit rating may not be good enough The better the offer, the more restricted it is. The card firms make slim profits from these cards so they only offer them to people with great credit records. The golden rule here is use a soft checker to see which cards you are likely to be offered, don’t apply and risk being refused.
- you may not get offered what the ad said Many banks say things like “up to 40 months”, but you could get offered a lot less. Bizarrely there is no minimum number of people that have to be offered the headline length. Money Saving Expert calls this the Great 0% Ads Scam.
- you may end up paying money About a quarter of the people that get these credit card deals miss or make a late payment, and then the 0% ends and they are back to high credit card interest rates.
- you end up carrying too much debt It may feel that 0% debt doesn’t matter, but if you want to get a mortgage or remortgage it does… mortgage lenders don’t like you to have a lot of unsecured debt even if it is cheap. So what may seem like a great way to organise your finances at the moment can backfire if later you are faced with having to clear large amounts of debt so you can buy a house or remortgage.
Treat 0% balance transfer deals like an interest-free loan
0% balance transfer deals are a great way to speed up your debt repayment as all your monthly payments are reducing your debt. But to really take advantage of them, don’t think “I don’t need to worry now, it’s free money!” but instead use the offer as an interest-free loan and aim to repay as much as possible by the end of the 0% period.
If you just make the minimum repayments, the debt won’t be anywhere near cleared by the time the deal runs out, as the minimum amount reduces each month. Instead, divide the amount by the number of months and set up a standing order to repay that amount each month. Then by the end of the deal, your balance will be zero.
Even better would be to make that standing order a bit more each month. If all goes well, you will be debt free sooner – especially important if you have your eyes on a mortgage! And if you later have any problems, then your debt is going to be lower and more manageable.
Is the end coming for cash back cards?
Cash back credit cards are becoming rarer and the amounts paid less generous as the lenders are making lower profits from these cards. Here are some lenders who have eliminated or cut cashback in the last 2 years:
- Capital One stopped offering new cashback cards and reduced rewards to existing customers in June 2015;
- RBS withdrew the Your Points scheme used by about a million RBS and NatWest customers in July 2015;
- Tesco halved the clubcard points offered by Tesco credit cards on non-Tesco’s shopping in November 2015;
- M&S halved the points on non-M&S shopping in March 2016;
- Amex reduced cashback rates on its main Platinum and Everyday Platinum card and hiked the amount you have to spend to get the cashback in August 2016;
- in October 2016, Santander stopped offering the 123 card (which provided cashback of 1%,2% or 3%) to new customers and the next month it announced the total cashback for existing customers will be capped at £9 a month from February 2017 – and you have to pay a £3 a month fee.
This article is updated regularly – latest update May 2017