27% drop in interest-free months for credit card spending leaves festive shoppers out in the cold

19 Nov, 2019

19 Nov 2019 In October 2018 there was a total of 17 credit cards offering interest-free periods lasting more than 20 months. The top 10 leading cards avoided adding interest for at least 26 months (Clydesdale Bank), while the best deal delivered 30 months (Santander).

A year later only five credit card companies offer shoppers 0% purchase terms greater than 20 months: MBNA (26 months), Santander (26 months), Barclaycard (25 months), Sainsbury’s Bank (25 months) and Tesco Bank (24 months). 

Extended interest-free periods give shoppers greater financial flexibility when using a credit card to buy big ticket items or during times of increased shopping activity. For example, around Black Friday and in the lead up to Christmas.

Last year consumers could spread the cost of major purchases — cars, house renovations, holidays, Christmas shopping — over the course of two years or longer, potentially easing any financial strain.

A year later, TotallyMoney and Moneycomms’ research shows the average 0% purchase duration time has dropped to just 9.8 months. The average in October 2018 was 13.5 months. This is a fall of 27%, suggesting credit companies are squeezing consumer finances harder as they look to recoup payments in full, in less time.

Despite cutting the number of interest-free months offered, consumers can still find favourable terms. With the average credit card rate at 19.9% APR, putting £1,000 on an interest-free card for 24 months, for example, may result in £398 saved in interest charges.

TotallyMoney is working to improve the UK’s credit score and help people move on up to a better future. With the help of a free credit report, customers can better understand their position in the credit market and understand if and where credit score improvements are needed.

Armed with this knowledge, there’s a higher chance of someone being accepted for purchase cards with longer offers, making it easier to spread the costs of any festive spending or upcoming big purchase.

Alastair Douglas, CEO of credit experts TotallyMoney, comments:

“Seeing a fall in the number of credit cards offering a 0% purchase deal and a drop in the number of interest-free months is disheartening. There’s little doubt both of these factors will impact some shoppers.

“Christmas is already a financially stressful time. People may spend more in the next few months than at any other time of the year and, as such, they may choose to lean on their credit card. It’s during these times that 0% offers come into their own and really benefit customers.”

He continues: “Used sensibly, these cards give you more breathing space as you can spread big expenses over longer periods of time, without worrying about interest. Just remember to make repayments in full and on time. This way you avoid late payment fees and get to enjoy the maximum number of months of your interest-free offer.

“At TotallyMoney, we’re on a mission to improve the UK’s credit score. Checking a report is the first step of this process and can help people to understand their score. With this, they can get better rates and more choice — helping them work towards a better financial future.”