Martin Lewis has issued a warning to credit card holders in the UK, advising them to take advantage of 0% balance transfer deals while they are still available. In his latest newsletter, the Money Saving Expert explained that such a card can save Brits £1,000s by slashing the interest they pay on existing debt.
How balance transfers work
A balance transfer involves getting a new credit card that pays off the debt on your existing cards, so you owe the new card instead. The transferred amount is interest-free for a set period, which means your repayments cut the actual debt rather than just covering interest. This, in turn, helps you clear what you owe faster.
Lewis warned that top balance transfer deals may soon be harder to get. "For most of the last year, apart from the usual competitive flick-flacks, top balance transfer deals — which let you cut the cost of existing debt — have barely budged," he explained. "Yet that could soon change, with markets pricing in that the Bank of England may increase the UK base rate up to four times over the next 12 months, starting next month."
Potential impact of rate hikes
He explained that such a hike could trickle down to consumer credit, with 0% terms being reduced while APRs and fees are increased. However, nothing is set in stone. "If you’re paying interest on credit card debt, my hunch is it’s safest to sort sooner, especially as there are some strong deals this week," he added.
The balance transfer deals allow people to pay off their debt interest-free during the introductory period, so switchers should consider whether they are able to pay it off in that time. After that, you’ll end up on an expensive regular APR, with rates averaging at 22.25%.
Advice for switchers
Martin also advises against further borrowing if possible. Additionally, he explained that credit card holders can't transfer a balance between two cards issued by the same bank, for example, from one Barclaycard to another. "Who your existing card debt is with will narrow down your choice," he said. "Then work out how long you'll need to clear your debt, and check which card(s) you're eligible for (as you'll need to pass a credit check as part of any application)."
The longest 0% deal comes from HSBC (definite 36mths 0%, 3.09% fee). Other offers come from the likes of Virgin Money and Tesco Bank.
