3rd June 2013
UK banks are upping the ante and battling it out to attract customers in need of a balance transfer credit card as some of the best deals in years hit the market writes Philip Scott.
According to an analysis by comparison site, MoneySupermarket, balance transfer fees on average are at their lowest level for five years at 2.81%. But the research revealed that while balance transfer fees are down, representative APR rates have steadily increased since 2009. Average rates currently stand at 18.7% in comparison to 16.44% in 2009.
In 2012, the average balance transfer fee was 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 compared to £84 now. Fees in 2011 stood at 2.96% on average but there was little movement in 2009 and 2010 with an average of 2.94%.
In addition, interest-free balance transfer periods are also at an all-time high. 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.
Kevin Mountford, head of banking at MoneySupermarket, says: “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 are not paying over the odds.
Mountford adds: “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 do not 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.”