Along with premature seasonal shop displays, November seems to be the time to dangle 0% interest balance transfer deals in front of indebted card-users.
The good news for customers seeking better deals is that the post-credit crunch drawing in of 0% interest time periods seems to be going into reverse. Customers are thus able to save hundreds of pounds by switching to a 0% balance transfer card as competition in the market hots up.
Royal Bank of Scotland recently came out with a Platinum Extended Balance Transfer card that charges zero interest on balance transfers for 23 months. It rivals top deals from Barclaycard and HSBC, which also offer 0% on balance transfers for 23 months. The latest offers reflect the steady rise in the number of interest-free days from an average of 352 in August to 361 days now.
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Michael Ossei, personal finance expert at uSwitch.com, says: "This is great news for consumers as it gives them another option for a longer-term interest-free balance transfer offer. Six years ago the longest 0% balance transfer offer lasted 12 months. Today, this has almost doubled and competition in the credit-card market is fierce."
Many people have built up debts on one or more credit cards – often at higher rates of interest around 18%. But a switch to a 0% balance transfer deal can save money. Let's say you owe £5000 on a card that charges interest of 17.9%. If you transfer the debt to a card that charges 0% interest for 23 months, you would save £879, even taking into account a transfer fee of 2.8%.
You can usually switch a balance from any other credit card, including a store card, though there might be some restrictions if you want to transfer a debt that you have built up on a card issued by the same banking group. For example, if you already had an RBS Low Balance Transfer Fee credit card (0% for 13 months), you would not be able to transfer the balance to the Platinum Extended Balance Transfer card.
And watch out for balance transfer fees. Most cards charge a fee of about 3% of the transferred balance. So if you switch a debt of £5000, you could expect to pay a fee of £150. Such fees have dipped recently, from a typical 3.01% in September to 2.97% in October, but the RBS card carries a 3.5% fee, which is above the market average. The cost of switching a £5000 balance would therefore jump to £175. The fee at Barclaycard, on the other hand, is 2.8%, so the £5000 balance transfer would cost £140.
Charlotte Nelson of Moneyfacts says: "Consumers should watch out for fees and decide which is the right deal for them. Some people might prefer a card that charges a lower fee but offers a shorter 0% balance transfer term."
Always make sure that you clear the debt before the interest-free period expires. If you still owe money after 23 months, you will start to rack up interest at a higher standard rate, typically 17.9%. The easiest way to stick to the payment deadline is to set up a direct debit.
Some 0% balance transfer cards charge 0% on purchases, too – but rarely for such a lengthy period. The RBS card, for example, charges zero interest on purchases for six months; with Barclaycard you get just three months.
You therefore have to use your card with care. If you make purchases on the card, you have to remember that the interest-free period is shorter and adjust your payment schedule accordingly. You might be better off with two separate cards – one for balance transfers and one for new purchases. It not only makes it easier to manage your borrowings but you will almost certainly get a better deal on purchases if you take out a separate card.
But remember that credit card firms are picky about their borrowers and save the best deals for consumers with a clear credit history. So, if you have struggled with debts in the past, your application is likely to be refused.
Ossei says: "The devil is in the detail. A market-leading product is only beneficial to consumers if they can actually get it. The previous 22-month balance transfer card from RBS/NatWest proved extremely elusive for those without a squeaky clean credit rating.
"Having now stretched the balance transfer period by a further month, to just under two years, it remains to be seen just how many of those who apply will be accepted."