In February 2023, the longest 0% balance transfer deals are 30 months long, but there aren’t many of them.
2017 was the high water point for 0% balance transfers – you could get deals for 43 months.
Then the deals got gradually shorter and the fees edged up. With the pandemic, most deals disappeared entirely and the few there were much shorter, a maximum of 24 months.
From late 2021 the market has recovered, but it is still harder to get a long 0% deal than it used to be.
Importantly the average size of a balance transfer has been falling too. This isn’t because people have lower balances to shuffle around. It’s much more likely to be because the lenders are setting lower limits on the new offer cards.
With interest rates increasing in 2022 and 2023, offering these deals is now more expensive for lenders.
Not so many offers direct from a card you have?
Many people keep cleared cards open as the lender often pops up with another 0% offer. But anecdotally the people getting the most offers in 2023 are those with little or no debt.
If you used to get a lot of offers and no longer get any, you may want to think of closing the card. This isn’t an easy decision as it affects your credit utilisation amount. But a lot of unused credit may also put off some lenders.
Great money savers if you can get one
These offers may not be as great as they were, but if you can get one, they will still save you a lot of money. Check Money Saving Expert for news of the best 0% deals at the moment.
Always use a soft checker to see which cards you are likely to be offered. If you just apply and are refused, that application on your credit record will make it a bit harder when you apply to someone else.
But people have been rejected even after being told they have a 90% chance of being accepted by third party soft checkers. So the best plan is first to check on MSE. And then if that sounds promising, see if that lender also has a soft checker and check there as well.
If you have money problems you probably won’t get one of them. It’s annoying but if you desperately need to move some credit card balances to 0% you may well not be able to get one.
Beware of these six traps!
1. Don’t ignore the fees
Fees were less important if you were getting a deal that was more than three years longs, but now it’s less than two years, the fees matter more. Check and see if you could get a deal with a lower or no fee if you go for one that isn’t quite the longest.
2. You may get less than the advertised term and only a small limit
Many adverts say things like up to 28 months, but you could get offered a much shorter time.
It’s sneaky, but there’s not much you can do about it. If you know your credit score isn’t great or you already have a lot of debt it may be safer to apply for a deal where you will get the maximum term even if it doesn’t look quite as good.
If you are hoping to refinance a large credit card balance you may not be able to.
Switching some of your debt to 0% is better than switching none! But it may still leave you with some expensive card repayments, so then you need to look at the best way to clear those.
3. Miss a payment and lose the whole offer
If you miss a payment or make it late, it’s likely the credit card will end your 0% deal and you are back to high-interest rates. And with a problem now showing on your credit record, you can’t easily get a new deal!
This happens to about a quarter of the people that get these balance transfer deals.
The lenders know this – it is one of the ways they make a profit from these bargain deals.
4. Only paying the minimum as it’s “free”
0% debt is cheap so it may feel like it doesn’t matter, but if you want to get a mortgage 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 now to organise your money now can backfire later. You may find you have clear large amounts of debt in a hurry so you can buy a house or remortgage.
5. You don’t close the cards you have cleared
This is a big mistake. It means there is the constat temptation to spend on the old card. Soon you may find you have a lot more debt,
Also it will make it harder to refinance when the 0% ends. A lot of lenders will only give you a new 0% deal if you don’t have an open account with them. So every open account is ruling out possible deals in the future.
6. You can’t refinance when the deal ends
It’s dangerous to assume that you will be able to refinance again when a new deal ends.
A significant number of people do not get another deal when one 0% period runs out. This may be because their credit rating has got worse or they have more debt. Or the lenders may just have tightened up their offers.
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 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.
So make sure you profit from these deals, not the lender!
None of these problems should stop you from taking out a 0% credit card.
You just have to be organised so that you take advantage of the deal and the lender doesn’t take advantage of you.
- Don’t rely on your memory to make those minimum monthly payments. You may think you are not going to forget, but a busy period at work, illness or a family crisis can spoil your good intentions. By missing a payment or making it late, you won’t just lose this 0% offer, you are likely to get a black mark on your credit rating which will make it hard to get another one.
Set up a standing order for the amount you know you can afford to repay every month. Or set up a direct debit so the minimum payment is taken every month – and pay some more whenever you are able.
- Remember when the 0% period finishes. If you have a diary, make an entry one or two months before the deal ends to remind you to start looking for a new one.
- Don’t be tempted into spending on your balance transfer card – leave it at home or, even better, cut it up!
The aim is to clear your debt – not keep shuffling it
Re-financing sounds like a great idea. But the best use of 0% balance transfer credit cards is to let you pay off the debt in the cheapest way, not keep on moving it somewhere else at the end.
This may not seem important now, with interest rates being low, but this is the only time it is easy for you to pay more than the minimum… In a few years time when rates have gone up, much of your monthly payment will be swallowed up by interest charges.
This is especially important if you may want to get a mortgage or remortgage in the next few years. Even if you think your debt is very cheap, you may fail a mortgage lender’s affordability checks.