By June 11, 2013 Read More →

Banks battle for credit card balances

  • Banks compete to offer low fees and long interest-free periods
  • Average balance transfer fee of 2.81% is lowest in five years*
  • Interest-free introductory period have almost doubled in duration in last five years
  • Yet representative APR has steadily increased 

Banks in the UK are battling to attract credit card customers in need of a balance transfer card, offering some of the best offers in years, according to analysis by MoneySupermarket.

The UK’s number one comparison website compared the current deals available on the top balance transfer cards to those offered since 2009. The results reveal average balance transfer fees are at their lowest level for five years at 2.81%. This time last year, average fees were just above the three per cent mark at 3.04% meaning those looking to transfer a balance of £3,000 would have paid an additional £91.20 for the privilege compared to £84 now.  Fees in 2011 stood at 2.96% on average with little movement in fees in 2009 and 2010 with an average of 2.94%.

The good news doesn’t stop there, with interest-free balance transfer periods at an all-time high too. Barclaycard’s Platinum Credit Card with Extended Balance Transfer leads the way by offering the longest ever zero per cent introductory period of 27 months. Many others are following the trend in offering long term balance transfer deals with many giving cardholders between 25 and 26 months to clear their debts without having to pay any interest. This is significantly longer than at the height of the credit crunch in 2009, when cautious lenders tightened lending criteria and offered interest-free periods of between 13 and 16 months.

The research further revealed, however, that while balance transfer fees are down, representative APR rates have steadily increased since 2009. Average rates currently stand at 18.70% in comparison to 16.44% in 2009.

Kevin Mountford, Head of Banking at MoneySupermarket, said: “We can clearly see proof of confidence returning to the credit cards market as we are witnessing some of the best balance transfer deals in years. Competition between providers therefore is rife, with plenty of choice out there for consumers looking to pay down their existing credit card debt.

“With increased choice comes the need for a more informed decision for those looking to take advantage of long term interest-free periods and cardholders should check that they aren’t paying over the odds. Switching to a card best suited to your needs is paramount, so consider how you will be using your card first before you switch. Balance transfer cards are perfect for those who simply want to pay off existing credit card debts without the burden of a high interest rate, as the total amount you pay back per month all goes towards chipping away at the balance. However, consider how long it will take you to pay off your current balance as the shorter the zero per cent term typically, the lower the balance transfer fee. If you don’t think you will be in a position to clear your balance by the time the interest-free period ends, then you should opt for a card with a lower representative APR such as Sainsbury’s Low Rate Nectar Credit Card that offers an APR of 7.8 per cent.”

Posted in: Credit Cards

About the Author:

Our in house editor who has many years financial services experience, and writes most of the journal entries you read on this site.

Comments are closed.