Consumers saddled with credit card debt built up over the festive period are being targeted by an array of balance transfer deals offering 0% interest for more than three years.
Halifax and Sainsbury’s Bank were among those to launch their “longest ever” interest-free deals last week, just in time for the first round of post-Christmas bills to hit doormats.
Providers claim these 0% cards can save consumers hundreds of pounds in interest payments by transferring balances from a card with a high rate. However, they are only useful if you repay what you owe before the interest- free period ends. You pay a percentage fee on the balance to switch, but then you can pay just the minimum due each month and get a grip on your debt without worrying about it growing.
Halifax is offering a deal at 0% for 38 months with a 2.75% transfer fee. Sainsbury’s is offering 0% interest on balance transfer for 37 months, with a three-month interest-free period on purchases and a 2.89% fee. Customers can also earn Nectar points.
After the deal ends, borrowers pay interest at the card’s standard rate, currently 18.9% for both cards.
However, these cards have not succeeded in taking the best-buy spot. There are cards with longer interest-free periods on the market, with MBNA launching a 39-month one just before Christmas. This is the longest balance transfer deal and has a fee starting at 2.98%. After the interest-free period ends rates rise to MBNA’s standard, at 20.9% for balance transfers and 22.9% on other debts. To access the most attractive deals you will often need a clean credit rating.
A borrower with £2,000 on a credit card at 18.9% would pay £32.10 a month, saving a whopping £1,192.30 over 39 months on an interest-free deal. This includes a one-off 2.98% balance transfer fee of £59.60.
Andrew Hagger from MoneyComms says: “January is often the busiest month for switching as people look to rejig their borrowing following the Christmas excesses.” He adds that the average 0% balance transfer term now stands at a record 22.5 months, up from 17.3 months two years ago: “The fact that card companies still seem to be able to make these 0% deals work is in no doubt due in part to the number of people who ‘fall off the wagon’ by missing a payment or exceeding their limit and suddenly find themselves paying interest at 18.9% or more.”
There are plenty of cards on the market offering 0% interest on these debt switches for a set period. Santander’s 123 credit card will give you 23 months of 0% on balance transfers and purchases with no fee at all, with the added advantage of cashback on spending.
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