Since rate-takers and rising bad debts are hurting card companies' profits, long-term 0% balance deals without fees will become harder to find as companies look for other ways to make up for their losses. Lisa Taylor, an analyst at moneyfacts.co.uk, talks about how competitive it is for providers to offer lifetime balance transfer deals, which is becoming more common.
"Lenders are having a hard time because they offered 0 percent deals, which were very appealing and helped them grow their market share in a very competitive market. Because of how the card market works, their actions have hurt their own profits.
"This, along with the fact that people who "live for today" are having a harder time paying off their debts, means that providers are turning to other ways to make up for their losses. In the past few months, we've seen examples like adding fees to balance transfer deals, removing limits on balance transfer fees, taking away incentives, and shortening introductory rates.
"However, this has led to the creation of lifetime balance transfer deals, which give consumers a good deal over a longer period of time without making the card industry lose money. With rates that are 0.7 percent lower than the "best buy" personal loan rate, these card deals are a good alternative to using a personal loan to refinance.
"Consumers looking for a short-term home for their credit card debt can still find some competitive 0% deals with 0% interest for up to 12 months. However, most of these deals now come with a balance transfer fee, which is usually 2% and can go up to GBP50.
"In the long run, consumers may have to run around the market like chickens with their heads cut off to find these deals. Since many lifetime balance transfer deals don't charge fees, they may be a good way to save money and time.
"Even though the rates for lifetime balance transfers can be lower, the consumer has to be strict and make fixed payments, just like with a loan, in order to get any benefit from the lower rates. At some point, people will have to look into structured payment plans, so why not do it now while the rates are good?
"The added flexibility of repayments may also be appealing to many consumers. Overpayments can be made without penalty, lowering the balance to a rate that is comfortable for them and lowering their interest liability at the same time. And when money is tight, monthly payments can be lowered to make it easier for people to stick to their budgets.
"Of course, there are other things to think about, like the relative costs of payment protection and the size of the debt. But it does raise the question of whether these balance transfer deals will be "sold out" in their current form soon because they are so competitive.
