Low card transfer deals hanging in the balance
SHOPPERS who over-indulged with their credit cards this Christmas have been warned against relying on interest-free balance transfers to dig them out of a debt hole.
Balance transfer credit cards allow users to shift over their existing card debt and pay zero interest for an introductory period, but deals are now becoming less generous.
Alastair Douglas, chief executive of TotallyMoney.co.uk, said Britons made a massive £1.6 billion worth of balance transfers last January but warned people cannot rely on rolling debt over for long periods as only MBNA and the Post Office now offer introductory deals lasting more than 30 months.
As introductory periods are being slashed borrowers have less time to clear debt before they start paying APRs starting at 18.9 per cent a year again.
Douglas said: “Some will become anxious if there is no longer a healthy stream of zero per cent offers to plug the hole in their finances.”
The choice of balance transfer cards has fallen almost a fifth to 91 in the last year, with all but 17 charging a fee for shifting debt.
The average fee is 2.7 per cent but some charge as much as 5 per cent, costing £50 for each £1,000 of debt you switch, business information service Defaqto has warned.
Head of insight Brian Brown said: “You should only consider a high transfer fee if you need the longest repayment period.”
Instead look for a card with a short introductory period, and either a low or zero transfer fee.