In June 2017, you can get a 42 month 0% balance transfer deal if you pay a hefty fee. Or you can get a 29 month deal with no fee at all!
This month the top offers have got just a fraction shorter (only 1 month less for most lenders) than those available in May 2017. That isn’t significant if you have expensive credit card debt – this is still a great time to refinance it. But it is interesting as for a long while the offers have been improving each month… perhaps the “top of the market” has been reached?
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 how the banks are planning on making money out of you.
In contrast, there are now a lot fewer cash back offers than a couple of years ago and the amount of cash back paid on the remaining cards is much lower.
Lenders compete to offer the best 0% credit card deals
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 June 2017, check MoneySavingExpert for the most recent news:
- the longest 0% period: MBNA is offering up to 42 months with a fee of 2.79% (also 42 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: Virgin has 40 months at 0% with a fee of only 1.7%.
- best low fee deal: Virgin are offering up to 30 months at 0%, with a fee of only 0.55% – that is a big saving over the cards offering 40 months plus!
- top no fee deals: Halifax at 29 months (but you may be offered a shorter term) and Sainsbury’s at 28 months.
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 harder it is 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.
- you may get offered less than 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.
- 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.
This article is updated regularly – latest update June 2017