The Motley Fool
My Wallet Hero

Are 0% balance transfer deals actually on the rise?

Recent headlines about balance transfer credit cards have all centred around their decline. I’ve written myself about the drop in 0% deals. In all, interest-free deals seemed to be getting shorter and shorter, while fees seemed to be on the rise.

However, with Virgin Money launching a 29 month 0% balance transfer card, are we seeing a turn in the market? As anyone knows, you have to take the ups with the downs, so are balance transfer credit cards on the up again?

What’s the deal?

After months of providers reducing the interest-free period on their balance transfer credit cards, Virgin Money made the news this week with the roll-out of its 29 month 0% balance transfer card. The deal slots right in alongside market-leading interest-free periods from the likes of Halifax and Sainsbury’s, and the 3% balance transfer fee attached is typical for that length of offer.

Why now?

So what’s changed to encourage Virgin Money to launch a headline rate such as this? As I have mentioned, while it is one of the longest terms on the market, it is not the only one. Halifax has been holding steady with a 29 month interest-free offer, while Barclaycard, Sainsbury’s and M&S Bank have not been far behind in offering 28 months.

Having said that, a new longer balance transfer term does indicate a slight uptick in confidence among lenders. Brexit being pushed further into the future may have been an influence. But it is more likely that if some providers are offering longer deals, then the rules of a competitive market mean that others will up their deals to match them.

There is also no denying there is still a demand among borrowers for balance transfer deals. The average credit card debt in the UK stood at £2,655 in March 2019 according to The Money Charity, and with the average interest rate also on the rise, a long 0% balance transfer term could be beneficial to lots of borrowers.

What next?

Are we seeing a resurgence in balance transfer deals which will lead to the heady heights of 40-something months interest-free last seen in 2017? In my opinion this is unlikely. While the offer from Virgin Money is an encouraging sign for those on the lookout for a competitive balance transfer deal, we are still in uncertain economic times which will have an impact on lenders’ confidence.

We may see a steady (and slow) increase in the length of 0% periods, but I would imagine that it is unlikely we will see the intense competition which drove the previous boom in balance transfer deals. It is also worth noting that while the interest-free period on these best buy deals are the longest available, the balance transfer fees have not been reduced and remain around 3%.

Verdict

If you are looking out for a balance transfer card, it is always worth comparing deals. Also be aware that lenders only have to offer the headline rate to 51% of applicants, so if you apply for one of these cards there is no guarantee you will receive the longest term. And while a balance transfer card can be a useful tool to consolidate and pay down your debt, remember that when the 0% term ends your remaining balance will incur charges based on your card’s standard APR.

Keen to compare balance transfer deals? Check out picks for the best balance transfer cards available

MyWalletHero, Fool and The Motley Fool are all trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the FCA, and we are permitted in this capacity to act as a credit-broker, not a lender, for consumer credit products (our FRN is 422737). The Motley Fool Ltd does not have permissions for, and does not advise on, investment products and services, but may provide information on investment products and services.

The Motley Fool receives compensation from some advertisers who provide products and services that may be covered by our editorial team. It’s one way we make money. But know that our editorial integrity and transparency matters most and our ratings aren’t influenced by compensation. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. The Motley Fool has recommended shares in Lloyds, Tesco and Barclays.