Low Transfer Balance Cards

Credit card competition - where will it end?

The past week has seen a rash of new lengthy credit card deals, culminating in the longest interest-free balance transfer period ever seen.

After MBNA and Virgin both moved to offer 18 month windows to new customers who moved their debts over, Barclaycard came back with a 20 month zero interest balance transfer rate for its Platinum Credit Card.

So what happens now?

Will card providers continue to ramp up their offerings, allowing borrowers to pay no interest for 21 months, two years, or even three?

And why, in a supposedly low-lending environment, are providers so keen to take on more of our debts?

“We could see more providers try to keep up and extend the balance transfer periods to 21 months, but I can’t see it going much further. With interest rates expected to increase soon, providers will be keeping an eye on that” says Louise Holmes at comparison site Moneyfacts.

This time last year the best credit card deals on the market offered a little over one year for a balance transfer period.

The average promotional length for balance transfer deals on the top five credit cards is now 17.8 months. These are better rates than those seen pre-crisis.

The surge in competition between card issuers has been driven by improvements in bad debts, lower borrowing from customers and greater interest in attracting customers to

Lenders are still happiest providing money to the top end of the market but comparison services say they have seen evidence that card companies are easing lending criteria.

But there is another side to the increases.

Balance transfer periods may be lengthening, but the eventual interest rate that customers pay on their credit cards when the introductory period ends is also increasing, as are fees.

When Barclaycard raised its balance transfer it also raised its balance transfer fees from 2.9 per cent to 3.2 per cent.

Customers who move their debts to take advantage of new 0 per cent balance deals should remember to add any fees and work out the eventual interest rates to their calculations before they rush to transfer.