Interest-Free Credit Made Easy!
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Although millions of crafty card players have switched their credit-card balances to take advantage of 0% balance transfers, most cardholders have yet to join in the fun.
That's a crying shame, because we Brits owe nearly £67 billion on our credit cards, of which almost three-quarters (75%) is interest-bearing debt. In other words, we pay interest on balances totalling £50 billion and, with the typical credit card charging an annual interest rate of 15.5% APR, this creates an interest bill of close to £8 billion a year. Ouch!
So, it makes sense to switch your existing credit-card debts to cards which charge no interest on transferred balances for an introductory period of up to a year, known as '0% balance transfer' cards. Then again, it pays to tread carefully when choosing a 0% deal, because the Devil's in the detail!
For example, it's important to watch out for transfer fees, which can take the shine off long-term 0% deals. To show you what I mean, here's a list of Best Buy 0% cards for balance transfers, based on data provided by independent financial researcher Moneyfacts (which powers the Fool's search engines for credit cards, loans, mortgages, etc.):
Best Buys for 0% balance transfers
Card name | 0% deal lasts. | Transfer fee | Typical rate
forpurchases
(% APR) |
|---|
GE Money
Transformation
MasterCard | 12 months from
date card issued | 2.5%
(£5 to £50) | 12.9 |
Virgin Money
MasterCard | 12 months
from date of transfer | 2%
(min: £3) | 15.9 |
| HSBC MasterCard | 12 months
from date of transfer | 2%
(min: £5) | 15.9 |
MBNA Platinum
Plus MasterCard | 12 months
from account opening | 2%
(min: £3) | 15.9 |
Barclaycard Platinum
MasterCard/Visa | 12 months
from date card issued | 2.5%
(min: £6.25) | 17.9 |
SkyCard MasterCard | From date card
issued to 01/06/07 | 2.99%
(min: £7.50) | 16.9 |
As you can see, the only Best Buy 0% card to include an upper ceiling on transfer fees is the GE Money card, with a maximum of £50 per transfer. This means that for transfers of less than £2,500, Virgin, HSBC and MBNA are the cheapest. For more than £2,500, GE is the winner.
Nevertheless, if you're prepared to switch between 0% transfer deals every six months, then you can enjoy fee-free 0% deals lasting six months from the likes of the Post Office, Citi, Co-operative Bank, M&S &More, ASDA and a few others.
On the other hand, if you're tired of switching between 0% deals every six to twelve months, then the clever alternative is to transfer your credit- and store-card balances to a card which provides low-rate lifetime balance transfers. American Express has just pulled its credit cards from this market, but Barclaycard's Flexi-Rate credit card has stepped in to fill the gap. Here are the top buys in this category:
Best Buys for lifetime balance transfers
Card name | Interest rate
(% a year) | Lifetime rate
lasts from. | Transfer fee |
|---|
Barclaycard Flexi-Rate
MasterCard/Visa | 4.9 | Date of card issue | 2.5%
(min: £6.25) |
Intelligent Finance
Life of Balance Visa | 4.95 | Date of card issue | Nil |
Lloyds TSB Advance
MasterCard | 5.5 | Date of transfer | 2.5%
(min: £2.50) |
GE Money Everyday
MasterCard | 5.9 | Date of transfer | Nil |
Morgan Stanley
Cashback MasterCard | 5.9
(for transfers
by 01/11/06) | Date of transfer | Nil |
Sainsbury's Bank
Platinum Visa | 5.94 | Date of transfer | Nil |
Note that balance-transfer fees are a relatively new feature of this market, but are slowly gaining ground. Of the above deals, the Intelligent Finance card wins my vote for having an ultra-low lifetime transfer rate with no transfer fee.
Finally, as almost all of these balance-transfer cards charge the usual high interest rates on purchases, it's crucial not to use them for spending. Otherwise, you'll pay interest on all of your purchases, which defeats the point of transferring your debts in the first place! If you want a great 0% deal for spending, the Sainsbury's Bank Visa card offers 0% for ten months, making it a Best Buy in this category.
I hope that this article has made paying less interest more interesting for you!
More: Use the Fool to compare compare credit cards, compare personal loans and compare savings accounts!
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