New TotallyMoney research looks at how banks are continuing to water down 0% balance transfer credit card offers, while tightening up who they lend to:

• In 12 months, lenders have slashed an average 4.5 months off the market leading balance transfer offers, while increasing fees by 0.21 percentage points
• Six years ago, the top 10 offers all had introductory interest-free terms of 40 months or more — now the market-leading offer is just 28 months
• Every month, half of customers (50.1%) are paying credit card interest
• £1,438 in interest could be saved by switching the average interest-bearing balance of £2,748 to the current market-leading balance transfer offer
• However, customers are now 19% less likely to be eligible for a credit card than they were a year ago
• For a one-off transfer fee of 2%-3.5%, customers can stop paying interest with a balance transfer for a set period of time (currently up to 28 months), meaning 100% of their repayments goes toward clearing debt.

 Balance transfers: in your best interest

In 12 months, balances on credit cards have grown by 9.3 per cent, and 50.1% of customers are now paying interest on more than £32bn of debt†. With a third of adults planning to get their finances in order in 2024, demand for balance transfer offers are expected to peak once again this January. In July this year, there were 769k balance transfer transactions, totalling £1.554bn.

And the savings can be considerable. For the average interest-bearing credit card balance of £2,748, customers could save £1,438 by shifting their debt to the market-leading 28-month balance transfer deal.

But the best offers are in decline

As millions are struggling to manage with the rising cost of living and high interest rates, banks are watering down offers, and being more cautious with who they lend to. In the past year, they’ve slashed the best balance transfer offers by an average of more than four months (from 28.3 to 23.8 months), while increasing fees by 0.21 percentage points (from 2.96% to 3.17%). In addition, borrowers are now 19% less likely to be eligible for a credit card than they were a year ago.

Alastair Douglas, CEO of TotallyMoney comments:

“This January, millions of people will be making it their New Year’s resolution to get financially in shape — and for some, this means cutting interest with a balance transfer so they can focus their repayments on paying off debts quicker, and cheaper.

“However, this year the offers are worse than last, and banks are being extra careful with who they’re lending money to. This means the savings aren’t as good as they were, and some customers could find it more difficult to unlock the best cards on the market.

“So it’s more important than ever to do your research, calculate all the costs, and find the best offer for your own personal needs. You should also keep an eye out for offers which give you pre-approval, guarantee the credit limit, interest rate, and offer duration. That way you’ll know your chances of acceptance, and exactly what you’ll get if successful.

“You should also remember to transfer the balance within the required time frame, make repayments on time, and avoid using the card for purchases and cash withdrawals — these transactions can come with sky high rates and put you on the back foot.

“If you’re struggling to make sense of your finances, then the free TotallyMoney app could help. It’ll put you in control of your own personal data and will notify you when the promotional offer on their credit card is coming to an end. That way you can stay a step ahead of the banks and avoid paying interest.”

 Andrew Hagger, Personal Finance Expert and founder of Moneycomms adds:

“Borrowers looking to move balances between cards will face less generous offers this year as lenders tighten credit underwriting, due to fears of mounting debt problems caused by higher mortgage rates and the wider cost of living squeeze.

“However, for consumers with a solid credit record it’s still worth switching balances, with both Barclaycard and M&S Bank leading the market with 0% terms of up to 28 months.

“Someone with the average balance of £2,748 could save £1,438 over 28 months with the Barclaycard deal and that’s after paying the one-off balance transfer fee of £94.80 (3.45%) when compared with a card rate of 23.9% APR.”