Terms on introductory zero percent interest cards for balance transfers are contracting as lenders seek to gain more value from them, according to research by TotallyMoney.
As a result, it said, consumers looking to take charge of their debt in the new year may struggle to find a deal that lasts long enough to clear their debt interest-free.
It found the maximum term for interest-free transfers has been slashed by 32.6 percent in just two years, from 43 months in January 2017 to 29 months in November 2019.
On average, terms fell from 25 months of zero percent interest in January 2017 to 17.9 months in November 2019 – a drop of 28.4 percent.
January is the busiest month for balance transfers. Last January, consumers made 701,000 transfers, worth £1.54bn.
The contraction in the length of honeymoon periods suggests lenders are eager to recoup their money in less time, TotallyMoney said. It warned, though, that it poses a risk to consumers, who could incur “punishing” interest rates if they fail to clear their debts in time.
Alastair Douglas, chief executive of TotallyMoney, said: “Many consumers act decisively to take control of their finances as the new year begins. Transferring their balance to a zero percent card can help them catch up, giving them time to pay off their balance without spiralling interest charges.
“This year, with lenders squeezing the number of months they offer a zero percent introductory rate, customers will be under pressure to pay off their debt more quickly. They need to be even more savvy about finding the right deal, to get the maximum breathing space, free from interest charges.”