MBNA opens the door to a credit card price war

MBNA has fired the first shot in what is predicted to be a major credit card price war in 2014.

The American credit card giant is now offering an unprecedented 29 months zero per cent on balance transfers.

The new deal from MBNA is likely to provoke a swift response from Barclaycard and possibly Halifax, Tesco Bank and NatWest, some of the most competitive players in the balance transfer segment of the credit card market.

It is almost certain we will see interest free terms breach the 30-month mark again in a market where the average 0 per cent promotional term just keeps growing.

The average zero per cent balance transfer term four years ago was 9.7 months; in 2011, it had risen to 12.1 months. Today, it stands at 14.2 months with more than a dozen cards offering an interest-free term of two years or more.

However, Andrew Hagger from MoneyComms.co.uk warns consumers against purely focusing on the length of the zero per cent deal.

"There's always a danger that some consumers will focus purely on the length of the interest-free incentive, even though they may not require or intend using the full 24-29 month zero per cent term on offer," Mr Hagger said.

"Although the potential interest savings are greater the longer you borrow at zero per cent, if you know you can pay the balance off sooner it makes sense to opt for a shorter-term deal as they often come with a much lower balance transfer fee," he added.