Credit card firms hike interest on balance transfer deals

Balance transfer credit card deals are becoming less generous as lenders amp up borrowing costs while decreasing interest-free periods, consumer group Fairer Finance has revealed. 

These deals are often used by customers to minimise the cost of their debt, but households will now find the deals on offer have worsened.

Balance transfer cards allow a borrower to move their existing credit balance to a new card.

The provider typically has an initial interest-free period for a number of months which allows a borrower to pay off their debt quicker without accumulating interest.

You are typically charged a fee to switch cards and are rolled on to a high APR after the interest-free period.

Most of the interest-free periods on balance transfer cards and the transfer fee are risk-based – some 59 out of 73 deals, according to Fairer Finance – which means they can change for each borrower depending on a credit check.

Cut limits: Interest-free periods on credit cards are shortening, according to Fairer Finance

But these once-attractive deals are now becoming more expensive and less beneficial to borrowers as the deals are squeezed at both ends.

Consumers now taking out a balance transfer card have just 18 months interest free on average compared to 20 months three years ago.

This means that spenders must pay off their debt quicker – or roll off the interest-free period to face high charges that will rapidly compound.

Plus, while the interest-free periods are shortening, the average annual percentage rate – the total cost of borrowing money that year, which spenders roll on to after the promotional period ends – is climbing.

In three first three months of 2022 the representative APR was 23.36 per cent on average. While it climbed slightly over the following years, it has seen a sharp increase since the beginning of 2025 to 28.8 per cent in April to June. This is despite three base rate cuts this year.

Fees are also creeping upwards. The average balance transfer fee – which is a one-time fee applied when you transfer the debt between cards – was 2.18 per cent at the beginning of 2022 – it is now 2.67 per cent.

This means balance transfer cards are now more expensive for consumers trying to manage their debts.

For example, First Direct has decreased the interest-free offer on its balance transfer deal from 27 months to 20 months over the past few years while hiking it fee by 0.7 percentage points.

James Daley, of Fairer Finance, said: ‘Zero per cent credit cards have long been a useful tool for consumers trying to manage debt and avoid costly interest payments. But our latest analysis shows the best deals are getting harder to find.

‘With fees rising and interest-free periods shrinking, it’s more important than ever that consumers shop around – and don’t assume they’re getting the same generous terms that used to be standard a few years ago. 

‘Customers also need to be wary of the fact that they may not get the advertised balance transfer fee or promotional period – as growing numbers of lenders are changing all parts of their offer once a customer has been credit checked.

‘There are still some great offers out there, but customers need to have a clear plan how they are going to clear their debt by the end of the offer period – as regular credit interest rates are a very expensive way to borrow.

Tesco Bank offers a good balance transfer deal, says Fairer Finance, as the 0 per cent period is 18 months while the transfer fee is just 0.99 per cent and the representative APR is 24.9 per cent.

Virgin Money has another good offering, also with an APR of 24.9 per cent,. Its card has a 20-month interest-free period with a 2 per cent transfer fee.

There are some cards with longer interest-free periods still available, although it is a slim selection. Virgin Money’s 30-month balance transfer card is on offer with a 2.45 per cent transfer fee and a 24.9 per cent APR

For those who don’t wish to pay a transfer fee, NatWest’s offers a fee-free card – but you’ll have to accept a lower promotional period of 12 months. Santander’s no transfer fee offering also has 12 months interest -free.

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