There is some good news for credit card users as new research shows that interest-free periods are getting longer! This means that users making balance transfers will be able to borrow money interest-free for longer periods of time. Here’s everything you need to know and how to make the most of interest-free credit card periods.
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How long is the average interest-free period?
According to research by Moneyfacts.co.uk, the average interest-free balance transfer term is now 602 days. This is the first time that the number has passed 600 days since 2018. Furthermore, this time last year, the average interest-free balance transfer term was just 530 days.
Balance transfer terms are not the only periods to improve. In the last quarter, average interest-free purchase card terms have also increased to 307 days. A year ago, the average term was just 284 days.
As well as this, balance transfer fees have fallen to an average of 1.95%. The longer interest-free terms and lower fees are making credit cards an attractive option for those in need of some extra cash.
Is it all good news?
While longer interest-free periods and lower transfer fees are appealing, it’s not all good news for credit card users. This is because the average interest rate charged on credit cards is on the rise.
Banks are raising their interest rates to take advantage of the spike in credit card use. Since the beginning of 2022, more Brits have turned to credit cards to help with the financial squeeze of inflation. As a result, the average APR has increased.
This means that borrowers may end up paying more than they would have before the interest-rate rise. This could be a problem for Brits who are already struggling to keep up with inflation and the rising cost of living.
While longer interest-free periods could make it easier to pay off debt before interest is added, Brits who do not pay in time could see their debt mount up quickly.
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How can you make the most of your interest-free period?
Longer interest-free periods mean that credit card users have longer to pay back debt before any interest is added. Therefore, credit card users are at less risk of running into serious debt!
If you’re considering making a purchase with your credit card, it is a good idea to take advantage of interest-free periods.
Interest-free balance transfer terms
A balance transfer involves moving debt from one credit card to another. This is usually done so that a person’s debt is all in one place, which can make it easier to manage.
Increased interest-free balance transfer terms mean that users will be able to move their existing debt across to another card without accumulating any interest for a longer period. This could be a great way to minimise interest on any existing debt that you have.
Interest-free purchase terms
Interest-free purchase terms refer to the length of time that purchases can be made with the card without accumulating any interest. Longer terms mean that borrowers will have more time to pay off what they borrow before being charged any interest.
The best way to make the most of longer interest-free purchase terms is to make big purchases that may take longer to pay off. Of course, this should only be done if you know you will be able to pay off the debt before the term ends.
Which credit cards have good interest-free periods?
If you would like to take advantage of the longer interest-free periods, here are some excellent credit card options to consider.
Santander All In One credit card
The Santander All In One has an interest-free purchase period of 20 months and offers 0.5% cashback on all purchases. It also has an interest-free balance transfer period of 26 months and a representative APR of 23.7%.
HSBC Purchase Plus credit card
This HSBC credit card offers excellent interest-free periods. The card has an interest-free purchase period of 22 months as well as a balance transfer period of 22 months. The card also comes with a £0 annual fee and a representative APR of 22.9%.
Barclaycard Platinum credit card
The Barclaycard Platinum credit card has an 18-month interest-free balance transfer period. As well as this, the card offers an impressive 20-month interest-free purchase period. The card also has £0 annual fees and a representative APR of 21.9%.
The post Good news! Interest-free credit card periods are getting longer appeared first on The Motley Fool UK.
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