The number of balance transfer credit cards on the market has increased by 14% compared to the same time last year, new analysis from Defaqto has shown.

There are currently 75 interest-free balance transfer deals on the market, compared to 66 in 2022, while the longest balance transfer deal without a fee has seen a slight improvement to 22 months, compared to 21 months a year ago.

Balance transfer credit cards work by taking on existing debt from other credit cards, without charging interest. The interest-free period will usually be limited to a set timeframe after which the debt will accrue interest, and the deals can be ideal for those who are paying interest on an existing credit card and need more time to repay it.

Although a 0% balance transfer deal offers free credit for many months, interest will be charged on any outstanding balance at the end of the deal period.

Consumer banking expert at Defaqto, Katie Brain, noted that “rising inflation and soaring interest rates” will have left many households worried about their credit card balances.

“It’s an extremely difficult time financially right now for many, so transferring outstanding debt to a 0% balance transfer credit card can be an effective way of getting your finances back on track for anyone grappling with credit card debt,” she commented.

“Whilst balance transfer cards can offer some welcomed breathing space, borrowers should always make a note of when the offer period comes to an end as these 0% rates are only introductory. Those who don’t manage to clear their balances in this time may be in for a nasty shock when their 0% rate reverts to a costly annual equivalent rate (AER), which could be as high as 34.94%.”

Despite the increased choice for consumers, Defaqto highlighted that balance transfer fees have started to rise, with some card fees increasing by more than 2% in the past quarter.

The analysis also revealed that the average fee for transferring a balance to a fee-charging card is 2.65%, compared to an average 2.42% last year, which can substantially add to outstanding debt.

While there are more deals to choose from, the average length of offer for deals with a fee has reduced. The average offer length for deals with a fee is now 19 months, compared to 20 last year. Furthermore, just five cards now offer 30 months or more interest free, with an introductory fee, compared to eight cards at the start of 2022.

“Bank of England data shows the annual growth rate of credit card borrowing rose from 11.5% in October to 12.2% in November last year, with individuals borrowing an additional £1.5bn in consumer credit in November, on net, following £700m of borrowing in October,” Brain added. “With this in mind, we suggest customers shop around for the best balance transfer card they are eligible for.

“Where there is the option to check your eligibility before applying, this is worth doing as the best deals on the market tend to only be available to those with an excellent credit rating. It is also important to check if there is a fee with the card as that could eat into any introductory offer.”

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