Competition in credit card market means longest-ever 0% deals

Credit card customers looking to shift debt to a new provider are being offered interest-free balance transfer terms averaging a record 590 days as competition heats up, according to a website.

Figures from Moneyfacts.co.uk show that across the credit card market, the average 0% interest introductory balance transfer term has increased from 468 days a year ago to 590 days now.

The 590 day average is the highest that Moneyfacts has recorded in its data going back to 2006. This means that balance transfer customers can get a 590-day period when they will be charged no interest on debt that they have transferred onto their new card from elsewhere.%VIRTUAL-ArticleSidebar-credit-cards%

Moneyfacts said that credit card firms are generally improving their deals to attract customers looking to sort out their finances after Christmas.

Balance transfer cards enable people to cut the cost of their borrowing by moving their existing card debt on to another card which charges a low rate of interest or no interest at all for a specified period.

But borrowers need to bear in mind any fees charged for shifting the balance over, when working out the potential savings that they could make by transferring their balance.

Moneyfacts's figures show that balance transfer fees are also tumbling in the battle to win over consumers' business, with the average fee to move debts over to another card now standing at 2.21%, down from 2.52% last year.

The website said that Bank of Scotland, Halifax, Lloyds Bank, TSB, Barclaycard and Tesco Bank have all tweaked their balance transfer credit cards since the turn of the year, by extending interest-free terms or reducing the fees to transfer balances over to them.

It said that, for example, Tesco Bank has increased its 0% balance transfer period from 37 months to 38 months and has slashed its balance transfer fee from 2.9% to 2.7%.

Both Lloyds and Halifax have increased their balance transfer periods from 28 months to 30 months, according to Moneyfacts.

Rachel Springall, a finance expert at Moneyfacts.co.uk, said: "As spenders recover from the excesses of the festive season, the start of a new year can trigger the desire to tackle outstanding debts.

"Heightened rivalry in the balance transfer market will therefore come as welcome news to borrowers, particularly those who want to avoid large fees - many of the latest deals now charge very low balance transfer fees, which makes moving credit card balances far more cost-effective.

"However, while these cards do give borrowers longer to repay debt without interest adding to the bill, they must ensure they pay more than the minimum monthly repayment and clear the balance before the deal ends."

Ms Springall said that once an introductory offer expires, credit card customers can typically find themselves being charged a 20.09% annual interest rate on their debt.

Recent Bank of England figures have prompted fresh concerns from charities about the levels of debt consumers have been taking on in recent months.

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said earlier this month: "We do need to keep a watchful eye on the huge growth in consumer credit we are now seeing.

"Increased borrowing is to be expected in an economy that is recovering - but such steep rises in borrowing in recent months are a cause for concern.

"Anyone struggling to cope with their credit commitments should seek free advice from a charity-run service like National Debtline as soon as possible."