Consumers plan to cut back on interest payments with balance transfer cards

 

April 14, 2008

A recent survey has revealed that many consumers in the UK are planning to try and avoid paying interest over the coming months by transferring their balances off high interest credit cards onto 0% balance transfer cards. These balance transfer credit cards have become increasingly popular over recent years, and have enabled those with high balances on high interest cards to avoid paying interest for a generous period of time. Recent research shows that millions of people in the UK are planning to go through this process over the coming months in order to save some of the money that they would otherwise spend on interest.

The recent research was carried out by Sainsbury’s Finance, and shows that between now and July around 4.3 million people are planning to switch their credit card balances onto 0% balance transfer cards, and between them they will be transferring a total of around £6.68 billion. It is thought that whilst the average sum that will be transferred is around £1500 there are also around 180,000 or so cardholders that will be transferring in excess of £5000 each.

An officials from Sainsbury’s Finance said that the popularity of these 0% balance transfer credit cards was not surprising, and he added: “Our research shows that there are an estimated five million people with outstanding balances who are not only incurring interest but also admit that it may take them longer than one month to clear their spend.” With these credit cards consumers can enjoy relatively generous periods of interest free credit – sometimes in excess of twelve months – within which to clear their credit card balances.

However, industry experts have warned that those looking to get a good 0% balance transfer credit card deal could experience a number of problems, and therefore should bear this in mind when looking for a card. One of the major hurdles that these consumers may face is the stricter lending criteria that has been put in place by many lenders who are trying to cope with the harsh effects of the credit crunch. This could make it increasingly difficult for many people to get a credit card, as there has been an increase in the level of credit card rejections, with many lenders being far more careful about who they are prepared to lend to.

Another problem is that there are now far fewer 0% balance transfer credit cards with capped transfer fees, and whilst consumers had a choice of around 18 capped rate cards a year ago they now have a far smaller choice of around 7 capped rate cards. This has made it increasingly important for consumers looking for a 0% balance transfer card to carefully browse and compare the different cards available from a range of lenders in order to increase their chances of getting a competitive and affordable deal.

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