5.8m Planning on Credit Card Balance Transfers

A report from Capital One reveals that 5.8m credit cardholders in the UK plan on transferring £11.9bn between credit cards in the next six months.

Nearly 6m Britons are eager to benefit from the many zero per cent and low interest balance transfer deals currently available in the UK credit card market. Capital One found through their research that the average cardholder will switch approx. £2,061 between cards.

Justin Basini from capital One said: “ Around 57 per cent of credit cards offer zero per cent interest on balance transfers, but people switching balances to these cards need to choose carefully because the length of interest free periods varies dramatically.

“ For example, nearly four out of ten of these cards have zero per cent interest balance transfers that last for six months or less, which may not be long enough for some people.”

Credit card holders would be wise to search for deals longer than six months as Capital One’s research indicates that the average credit cardholder takes ten months to clear the balance that they have transferred.

Last month, Moneyfacts.co.uk suggested that UK consumers could benefit from taking advantage of zero per cent credit card deals as opposed to taking out a personal loan, with many offering lower interest rates than their loan equivalent. Credit cards that offer low rates of interest for the lifetime of the balance may even be, in some cases, cheaper than a personal loan, providing the card isn’t used for purchases.

Low rate credit cards are also worth considering when you consider that just 43 per cent of cardholders switching to zero per cent card deal actually cleared their balance in less than six months.

More worrying, however, is that 10.4 per cent of UK credit cardholders took between seven and nine months to clear their balance transfer, 27.2 per cent took between ten and twelve months, with 4.2 per cent taking between 13 and 18 months.

The sum of money to be moved between credit card deals is expected to be huge also, with 2.44m Britons set to switch £1,000 or less between cards, 2m moving £1,000 - ££2,000, 678,000 planning on moving between £2,000 and £5,000 and 693,000 consumers planning to switch more than £5,000 between credit cards.

Many of these ‘rate tarts’ hope, in the short to medium term, that they will save paying considerable amounts of interest on their credit cards by switching to better deals.

Alisdair Milton
8th May 2006

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