Despite the financial pressures throughout the pandemic, 0% credit card deals have remained fairly static. There is some good news for customers, however, as balance-transfer fees have reduced significantly since last summer.
How do balance-transfer cards work?
A balance-transfer credit card allows you to transfer existing credit card or store card debt to utilise a period of 0% interest. Balance-transfer cards can be helpful for repaying your debt more quickly than with a standard credit card, but they often charge an initial fee for transferring money, and are only interest-free for a limited period of time.
Before you opt to take out a balance-transfer credit card, you should weigh up whether a deal with a longer interest-free period but a higher balance transfer fee is better value than a fee-free option with a lower 0% period.
What has happened to the fees on balance-transfer cards?
The average balance-transfer fee has fallen from 2.55% in June 2020 to 2.12% in June 2021, meaning there are now cheaper deals on the market than there were a year ago. If you are considering taking out a balance-transfer card, it is worth shopping around to make sure you get the best deal available to you. The number of introductory interest-free balance-transfer deals available has also risen slightly from 56 to 59, so there are plenty to choose from.
For a list of some of the best balance-transfer cards on the market, visit our article "Which are the best balance transfer and purchase credit cards?".
What has happened to the interest-free period on balance-transfer cards?
The average interest-free period on a balance-transfer card has fallen marginally, from 555 days in June 2020 to 550 days in June 2021. However, this headline statistic masks the reality in the market, where a handful of lenders have made significant cuts to their interest-free deals, while the majority have stayed the same, with some even slightly increasing their offers. Again, it pays to shop around, making use of eligibility checkers to avoid having marks on your credit file.
What do the changes mean for you?
If you have existing credit card or store card debt, there are now more - and better - balance-transfer deals on the market, meaning that you have more favourable options when shopping around to move your debt to an interest-free account.
This would enable you to pay off your debt without paying any interest, so long as you make sure you repay the balance in full within the specified time limit. You should bear in mind, however, that you will still have to pay an average of 2.12% of the amount you are transferring in order to move your debt onto a balance-transfer card. There may also be a slight shrinkage of the average interest-free period, giving you less time to repay your debt before interest rates kick in.
What fees can you expect on a balance-transfer card?
Below is a table which illustrates the amount of money you can expect to be charged, on average, for transferring different amounts of debt onto a balance-transfer credit card.
| Existing credit card or store card debt | Initial charge (based on average 2.12% balance transfer fee) |
| £1,500 | £31.80 |
| £3,000 | £63.60 |
| £4,500 | £95.40 |
| £6,000 | £127.20 |
| £7,500 | £159.00 |
| £9,000 | £190.80 |
You would then have an average of 550 days to repay your existing debt in full (excluding the initial transfer fee) before you would start to be charged interest on the funds in your balance-transfer account. The interest you would be charged differs depending on which card you have.
Further information
Although balance-transfer credit cards can be a useful tool for repaying debt, making an application to open one will leave a mark on your credit rating, so it is wise to make sure you are in the best position possible to be approved before applying, use an eligibility checker and refrain from making multiple applications over a short period of time.
For more advice, check out our guide to which cards offer eligibility checkers and have a good customer service record.
