In early December 2017, you can get a 38 month 0% balance transfer deal if you pay a fee. Or you can get a 28 month deal with no fee at all!
This is a great time to refinance your credit card debt – grab a deal as soon as you can because the really good ones may not be around in a few months!
Why is this urgent?
From 2015, the 0% offers were improving each month. Lenders were competing to be at the top of the best buy tables, with the longest offers. That has now stopped… In May 2017 you could get a 43 month deal. That may well prove to be the high point for balance transfers.
The interest rate rise at the start of November reduced the profits the banks make from these deals. When interest rates are very low, offering 0% doesn’t cost a bank that much, but as rates edge up, it gets more expensive for banks to offer you a card with no interest, so there won’t be as many good offers around in future. After the rate rise, Tesco immediately cut the length of their previously market topping offer from 39 months to 38 months – it’s no longer a best-buy because of its high fee.
The best 0% balance transfer offers
The following offers were all available in early December 2017 – see MoneySavingExpert for the most recent news:
- the longest 0% periods:
- Barclaycard are offering up to 38 months with a fee of 1.4%.
- Virgin are offering 38 months with a fee of 1.5% – and you won’t be offered a shorter period
- top low fee offers:
- Lloyds offer up to 33 months, with a fee of only 0.57% – that is a big saving over the longest offers.
- Sainsburys also offers 33 months, but there you definitely get the full term and their fee is only a bit more at 0.59%.
- top no fee deals:
- Sainsburys offer 28 months with no fee at all.
- TSB also offer up to 28 months, but (you may get a shorter period).
The 4 catches to look out for
Your credit rating may not be good enough
The better the deal, the less likely you are to get it. Always use a soft checker to see which cards you are likely to be offered, don’t just apply and risk being refused.
Only getting a shorter 0% period than the ad mentioned
Many adverts say things like “up to 40 months”, but you could get offered a much shorter time. Bizarrely there is no minimum number of people that have to be offered the headline length.
Be late paying and you lose the deal
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. And many people find at the end of the interest-free period they can’t switch to another deal.
This is a huge money spinner for the card companies. In March 2017 there were over 600,000 balance transfers in Britain, adding up to more than a billion and a quarter pounds.
So read How banks make money from 0% cards and make sure you are the one who profits from these offers, not your bank!
You end up carrying too much debt
It may feel that 0% debt is cheap and 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 at 0% interest. So what may seem like a great way to organise your finances now may backfire if later you have to clear large amounts of debt so you can buy a house or remortgage.
Top tip – turn a 0% balance transfer into an interest-free loan
These 0% balance transfers are a great way to clear debt as all your monthly payments are reducing your balance. But don’t think “I don’t need to worry now, it’s free money!” but instead really take advantage of them – 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.
This article is updated regularly – latest update December 2017