In October 2017, you can get a 39 month 0% balance transfer deal if you pay a fee. Or you can get a 29 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?
For a couple of years, the 0% offers were improving each month with lenders competing to be at the top of the best buy tables with the longest offers. That has now stopped…. October’s top offer is one month shorter than September. In May 2017 you could get 43 month deals. That may well prove to be the high point for balance transfers.
This may be in response to the Bank of England getting concerned about the amount of credit card debt in the economy – we now owe over £200 billion in unsecured debt. The FCA, who regulates most credit card lenders, is also worried that too many people have persistent credit card debt.
The best 0% balance transfer offers
The following offers were all available in early October 2017, check MoneySavingExpert for the most recent news:
- the longest 0% periods:
- Barclaycard are offering 39 months with a fee of 1.45%. Sainsburys are also offering 39 months but at a fee of 2.39% – that’s a much more but with Sainsburys you will definitely get the full 39 months, with Barclaycard you may be offered less.
- best low fee deal: Halifax 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 slightly more at 0.59%
- top no fee deals: Halifax is offering up to 29 months at 0% with no fee at all. Sainsburys 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 deal, the fussier the lender is about who they offer it to. 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 much shorter time. 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. And many people find at the end of the interest-free period they can’t switch to another deal.
This is big business – the banks are making these tempting offers knowing they will make a lot of money from them. In March 2017 there were over 600,000 balance transfers in Britain, adding up to more than a billion and a quarter pounds. Read How banks make money from 0% cards and make sure you are the one who profits from these offers, not the bank!
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.
Top tip – turn a 0% balance transfer into an interest-free loan
0% balance transfers 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.
This article is updated regularly – latest update October 2017