Andrew Hagger: Average length of zero per cent deals now over a year - but beware sting in the tail

With the UK economy still fragile and government cuts taking effect, you'd expect credit card providers to be nervous about getting their fingers burned again by bad debts.

In the post-banking crisis era the credit card market was much quieter, with fewer new products being launched, and many of us wondered if the 0 per cent balance transfer was soon to be a thing of the past. New Moneynet research reveals that the opposite is true, however, with long-term 0 per cent deals now more widespread than they've ever been. There are now 54 credit cards offering an interest-free balance transfer term of 12 months or more, the highest on record. The average term of a 0 per cent deal is at a new high of 12.16 months, up sharply from just 9.87 months a year ago.

There are a couple of factors helping card providers offer these record-breaking deals. Not only are borrowing costs at an all-time low, but the Consumer Credit Directive, which came into effect on 1 February, gives lenders the ability to be more selective, as they only have to offer their best deals to 51 per cent of successful applicants, compared with the previous requirement of 66 per cent.

With 58.2 billion outstanding on credit cards there are still plentiful opportunities for card providers to pick up business from their rivals, hence more providers are upping the ante in a bid to tempt us into switching allegiance.

Offering long-term 0 per cent deals is also an effective way to generate massive free advertising exposure, through media coverage and the "best buy" tables on the internet.

The downside for consumers is that even though lower borrowing costs have enabled providers to offer extended interest-free terms, the interest rate becomes markedly more expensive once the promotional deal expires.

The rates at the end of the interest-free deal can vary enormously. For example, on the 17-month 0 per cent deal from Nationwide Building Society the representative APR is 15.9 per cent, whereas the Classic MasterCard from the Post Office bounces to 19.9 per cent once the offer expires, well above the market average.

Card providers can also offer smaller credit limits, enabling them to keep the cost of interest-free lending to a minimum. And if consumers happen to make late monthly payments or miss them altogether their interest-free offer is terminated immediately, even if it is their first slip-up.

"Free plastic" looks to be here for the foreseeable future, and used wisely is a smart way to manage your finances. But if you cannot resist the temptation to carry on spending on your 0 per cent flexible friend, a bigger and more expensive headache awaits.

• Andrew Hagger is head of communications at Moneynet.co.uk