In March 2018, you may be able to get a 37 month 0% balance transfer deal if you pay a fee. Or you can get a 29 month deal with no fee at all!
There were 629,000 balance transfers in January 2018, and they averaged nearly £2,500 – adding up to a huge £1.6billion. In the last year, these deals have tended to get shorter. In May 2017 the longest deal was 6 months more than it is now.
This month the table-topping deals are much the same length as last, but some of the fees are higher. For example, the Lloyds low fee deal (see below) now has a fee of 0.78%, in February it was only 0.57%.
The interest rate rise in November reduced the profits the credit card companies make from these deals. When interest rates are very low, offering 0% doesn’t cost much, but as rates edge up, it gets more expensive for banks to offer you a card with no interest.
The next interest rate rise is expected to be in May 2018 (see UK interest rate rise is coming) – that’s not good news for 0% offers for the rest of this year. So now is a great time to refinance your credit card debt.
The best 0% balance transfer offers
The following offers were all available at the start of March 2018 – see MoneySavingExpert for the most recent news:
- the longest 0% periods:
- MBNA are offering up to 37 months with a fee of 1.89%;
- Sainsbury’s are offering 36 months. The fee is much higher at 2.89%, but you won’t be offered a shorter term.
- top low fee offers:
- Sainsbury’s offers 33 months, you definitely get the full term and at only 0.59% – a big saving over the longest offers and only a few months less.
- Lloyds offer up to 33 months, with a fee of 0.78%.
- top no fee deals:
- Halifax offers up to 29 months with no fee at all – but you may be offered a shorter term with a high fee!
- Sainsbury’s offer 28 months, you won’t get offered a shorter term.
Four catches to look out for
Is your credit rating good enough?
The better the deal, the less likely you are to get it. If you don’t have a very good credit rating you aren’t going to get a great deal. Always use a soft checker to see which cards you are likely to be offered, don’t just apply and risk being refused.
Tempted by a long deal but only offered a shorter one
Many adverts say things like up to 32 months, but you could get offered a much shorter time. This is very common. It’s sneaky, but there’s not much you can do about it.
Pay late one month 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 their 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 one month in 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
0% debt is cheap so it may feel like it 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. What may seem like a great way to organise your finances can backfire if later you have to clear large amounts of debt in a hurry 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 March 2018