INTEREST-free periods on credit cards are expected to get even shorter by the end of the summer as lenders continue to cut rates.
It means that borrowers taking out new credit cards will have even less time to pay off their debts before they’re charged interest.
Lenders made the predictions as part of the Bank of England’s quarterly Credit Conditions Survey of banks and building societies.
Interest-free periods on balance transfer cards have dropped significantly over the past two years, reports Moneyfacts.co.uk.
Back in July 2017, the longest interest-free period was with MBNA that offered 43 months.
Now, the longest interest-free period is for 29 months with MBNA, a drop of 14 months.
Top 0% credit card deals
THESE are the top 0 per cent credit card deals currently on offer:
Balance transfer cards
Longest 0 per cent period:
- MBNA Long 29 Month Balance Transfer Credit Card – Apply Here
Transfer fee: 2.75 per cent
Cost of transferring £1,000 balance: £27.50
Monthly payment to clear £1,000 balance over term: £34.50
Smallest transfer fees:
- MBNA 26 Month Balance Transfer Mastercard – Apply Here
Transfer fee: 1 per cent
Cost of transferring £1,000 balance: £10
Monthly payment to clear £1,000 over term: £38.50
No fee:
- Halifax Balance Transfer Credit Card 19 months – Apply Here
Transfer fee: Free
Cost of transferring £1,000 balance: £0
Monthly payment to clear £1,000 over term: £52.62
Purchase card
- Barclaycard Platinum 27 Month Purchase and Balance Transfer Visa – Apply Here
Monthly payment to clear £1,000 over term: £37.01
Interest rate after free period: 19.9 per cent
Purchase credit cards have also shortened their interest-free periods by four months, to just 27 months since July 2017.
Customers are charged interest once the interest-free period comes to an end, often over the odds compared to other standard cards.
These rates are usually around the 20 per cent mark compared to low rate card that charges around 9.9 per cent.
Borrowers can transfer their debts to a balance transfer card to stop accruing high charges and pay off their debts quicker.
They will have to pay a fee though, usually around two per cent of the outstanding balance.
And with shrinking interest-free periods, customers are going to have to do this more often which can add to their debts making it harder to pay off.
How to cut the cost of your debt
BEING in large amounts of credit card debt can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money
Work out your budget – by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner – If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don’t pay
Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
Rachel Springall from Moneyfacts.co.uk put the “disappointing” cuts down to new rules introduced by the Financial Conduct Authority in February last year aimed at helping borrowers get out of debt.
Under the guidelines, lenders must offer borrowers a way to repay balances when they’ve been in persistent debt for 36 months or more, including potentially reducing, waiving or cancelling any extra charges.
Rachel explains that banks and building societies would argue that shorter terms discourages borrowers from being in constant debt.
She added: “Despite the persistent cuts to interest-free offers, it is important that consumers consider them instead of incurring consecutive interest charges.
“If someone made a purchase of £3,000 on a typical credit card that charges 18.7 per cent and made just £100 in repayments per month, the debt would linger for over three years and cost them £970 in interest.
“Borrowers looking to make a purchase or move their debts still have many options to choose from, but they would be wise to scrutinise any upfront costs first.”
Most read in Money
The survey also showed that lenders believe there will be more mortgages available on the market, but the number of non-mortgage loans being approved is expected to decrease over the next three months.
Zero per cent credit cards can help you destroy your overdraft debt, but you should always be aware that you’ll still need to repay your debts.
Alison Cairns, 58, from Fife told The Sun how she ended up in £12,000 worth of debt in just two years due to rip-off credit card rates.
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https://textbacklinkexchanges.com/lenders-slashing-interest-free-credit-card-periods-leaving-borrowers-with-less-time-to-repay-debts-and-hitting-them-with-massive-charges/
News Photo Lenders slashing interest-free credit card periods leaving borrowers with less time to repay debts and hitting them with massive charges
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Thanks for sharing this informative blog. Keep it up admin
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