Martin Lewis has issued an 'important alert' to millions of people in the UK, warning that those with debt on a credit card or store card are set to see four changes. The money-saving expert put this down to the likelihood that interest rates are going to rise.
Speaking on X on Friday, October 16, he said 'subtle' changes were looming over so-called balance transfers. He warned the changes could have a significant impact on how much you pay, the kind of deal you get and whether you even get a deal.
What are balance transfers?
Balance transfers happen when people move debt from one credit card to another. Experian says such moves often see bank customers get 0% interest for a certain number of months. Given the debt charity StepChange says 18 million have credit card debt in the UK, millions could be affected by what is set to change.
Yet after a senior Bank of England official warned in a speech in September that interest rates could rise, Martin said people trying to sort such deals could face four changes. Firstly, he said the length of time of a 0% deal could be cut. He also warned the one-off fee people pay could go up. The rate people are charged once the 0% deal ends could rise, he said. And he warned fewer people could be accepted for the best deals.
Martin Lewis's warning
In the post on X - captioned 'important alert' - he said: "This is a warning for anyone who has existing debt on credit or store cards. I'm concerned the deals you can get to cut the cost are about to get worse. So acting sooner is safer."
He went on: "Now, we're in an upward rate environment. The predictions are the Bank of England is going to put UK base rates up. And when that happens, the changes to credit card 0% deals are subtle. The 0% length may shorten. The fee, the one-off fee you charge for doing a balance transfer may increase. The go-to APR, the rate you charge once the 0% ends, may also increase. But I suspect the most likely change and the most difficult to spot is that fewer people will be accepted for the best deals. They're going to tighten their eligibility criteria."
The presenter of the Martin Lewis Money Show on ITV explained what this could mean. "So, they might still advertise a three-year balance transfer, 0% interest free," he said. "Sounds great. They're available at the moment. But suddenly, when you apply because it's an up to rate. Not as many people are going to get three years. Some will get two, some will get one. So, you need to get your skates on."
How does a balance transfer work?
People who get a balance transfer card can get 0% interest for a certain amount of time. When this ends, they move back to the bank or lender's standard rate, which can be a lot higher, so Experian advises people to pay off the debt if at all possible before the period ends. You pay a fee for a balance transfer, which Experian says can be around two to four per cent of the amount you are transferring.
The credit reporting agency says balance transfers can be good for rewards, keeping track of payments in one place and saving money due to 0% rates. Yet it warns downsides of balance transfers include fees, time limits on 0% rates, interest on new purchases and transfer limits that restrict how much you can transfer.
He urged people to listen to his new podcast on the subject - on the BBC Radio 5 Martin Lewis Podcast. He concluded: "Because the less interest you're paying, the more of your money clears the actual debt itself."
