Big drop in interest-free credit card deals leaves festive shoppers out in the cold

Photo: Philip Toscano/PA Archive/PA Images

A dramatic drop in the number of credit cards offering introductory 0% interest deals for purchases could mean trouble for Brits this Christmas.

The total number of credit cards offering interest-free periods lasting more than 20 months has dropped from 17 in 2018 to just five in October 2019, according to research by credit experts TotallyMoney and advisers MoneyComms.

The top 10 leading cards in 2018 avoided adding interest for at least 26 months, while the best deal – one of Santander’s options – delivered 30 months.

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But a year later only five credit card companies offer shoppers 0% purchase terms greater than 20 months: MBNA (26 months), Santander (26 months), Barclaycard (25 months), Sainsbury’s Bank (25 months) and Tesco Bank (24 months). 

Extended interest-free periods give shoppers greater financial flexibility when using a credit card to buy big ticket items or during times of increased shopping activity. For example, around Black Friday and in the lead up to Christmas.

Last year consumers could spread the cost of major purchases — cars, house renovations, holidays, Christmas shopping — over the course of two years or longer, potentially easing any financial strain.

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But just a year later, the average 0% purchase duration time has dropped to just 9.8 months. The average in October 2018 was 13.5 months. This is a fall of 27%, suggesting credit companies “are squeezing consumer finances harder as they look to recoup payments in full, in less time”, TotallyMoney said.

It added that, despite cutting the number of interest-free months offered, consumers can still find favourable terms. With the average credit card rate at 19.9% APR, putting £1,000 on an interest-free card for 24 months, for example, may result in £398 saved in interest charges.

Credit card spending in the UK hit an all-time high of £12bn earlier this year.

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Alastair Douglas, CEO of TotallyMoney, said: “Seeing a fall in the number of credit cards offering a 0% purchase deal and a drop in the number of interest-free months is disheartening. There’s little doubt both of these factors will impact some shoppers.

“Christmas is already a financially stressful time. People may spend more in the next few months than at any other time of the year and, as such, they may choose to lean on their credit card. It’s during these times that 0% offers come into their own and really benefit customers.”

He added: “Used sensibly, these cards give you more breathing space as you can spread big expenses over longer periods of time, without worrying about interest. Just remember to make repayments in full and on time. This way you avoid late payment fees and get to enjoy the maximum number of months of your interest-free offer.”