Could this be the end for interest-free credit cards?

THE number of interestfree credit cards on offer has fallen to a record low.

The cost of transferring debt to zero per cent balance transfer cards – designed to help borrowers slash the cost of their debt – has also soared, figures show.

In addition, shorter deals mean borrowers will have less time to clear their balance before interest is added.

Interest-free credit cards are supposed to help borrowers repay their debt faster, as they do not have to pay any interest for the duration of the deal.

But experts warn that, as banks face tough new rules around lending to people in persistent debt, more and more interest-free cards will disappear.

In September, there were only 87 such deals available – the lowest number since 2006, when financial information firm Moneyfacts’ records began. This is down from 101 in June.

Virgin Money and Post Office Money are among providers who have withdrawn zero per cent balance transfer deals or cut the interest-free period.

Credit card fees are also on the rise, increasing from an average rate of 2.04 per cent in January to 2.2 per cent today.

Martin Lane, from comparison website money.co.uk, said: ‘With more potential interest rate rises looming large on the horizon, credit card providers are having to rein in their balance transfer offers and trim the length of their zero per cent deals. While the balance transfer market is far from dead, it’s unlikely we’ll see a return to the longer and cheaper deals we saw just a few years ago.’

Rachel Springall, of Moneyfacts, said: ‘It’s clear to see that the credit card market is adapting to economic pressures and growing scrutiny regarding consumers with persistent debts.

‘Credit card providers have diluted their enthusiasm to offer table-topping interest-free balance transfer offers over the last few months.

‘As a business, credit card providers would need to reassess their position if the economy was unstable, and they will likely attempt to rein in the amount of interest-free balances accumulated.’

She said this could prove costly to those already struggling with debt, adding: ‘If lenders continue to tighten their interest-free offers, the cost of persistent debt will only escalate further and could result in customers paying out more in balance transfer fees, time and time again.

‘Individuals’ debt on credit cards is also on the rise, so there is a greater chance that borrowers may fail to repay their balance before interest applies.’

Credit card debt in the UK hit £72.1billion in June 2018, up from £68.5billion the previous year, according to The Money Charity.

Lenders have been forced to tighten their belts following rules announced by the Financial Conduct Authority (FCA) watchdog, designed to help four million borrowers with persistent debt.

Experts claim the tough rules – meant to help those with persistent debt – are partly to blame for the lack of interest-free deals.

But the FCA says this is unlikely because such deals are more easily accessed by those with high, not low, credit scores.

An FCA spokesman said: ‘The changes we introduced to the credit card market are targeted at people in persistent debt, who tend to have lower credit scores.

‘Interest-free balance transfers are typically more easily accessed by those with higher scores. These are two different markets, so the changes will have had little impact on the availability of offers.’

‘Providers are having to rein in’