A new offer from Egg may make rate tarts re-think their attitude to 0% cards.
Aren't 0% cards for balance transfers great? They allow us to move existing credit card debt to them, and charge us absolutely no interest, as long as we pay off the balance within the 0% period -- which can be up to a whole year! Of course, you do need to have a certain degree of self-discipline to use one, and understanding how they work is important.
Transfer your balance, and then cut up the card
For a start, one of the key things to realise is that, in most cases, once a balance has been transferred the card should be literally cut up and not used again (or locked away carefully). The reason for this is because although your transferred balance is being charged at 0%, any subsequent spending you do will be charged at the card's normal APR -- which is often over 12%.
And with the exception of a few providers, most card issuers' use any payments you make to pay off your cheapest debt first -- in this case the balance being charged at 0%. So although you may think you've cleared that extra spending with a simple payment, the money's gone to reduce your 0% debt instead -- leaving the new spending to rack up interest!
And it doesn't take a genius to realise that even if your card is also offering a 0% period for new purchases you can also be stung. Essentially, unless this period is for exactly the same duration as the 0% for balance transfers deal (or you intend to pay off the balance in full when the earliest 0% deal expires) you'll find the same thing can happen. But assuming you don't fall into one of these traps, and that you set aside enough money each month to fully clear that balance when the 0% deal expires, you'll be quids in!
Egg Visa card
And if you're the type of person who's constantly on the lookout for a new 0% card, you might find a new deal offered by Egg Visa card worth considering. It initially offers new customers 0% on balance transfers for up to nine months (until 1 November 2006) whilst also offering 0% for new purchases for six months (but remember the rule above!).
However, the interesting thing about the Egg card is that cardholders are promised two further 0% periods on the anniversary of taking out their card. So you could transfer a balance and pay it off in full by November, then, come January 2007 you could transfer another balance to your Egg card and get 0% for five months. Then, in January 2008 you would be entitled to transfer over another balance, and again pay no interest for five months.
This would therefore guarantee you two free, five-month balance transfers over the next two years, without you having to go to the trouble of applying for new cards each time. Of course, the 0% anniversary periods are only for five months; there's a chance you would be able to find extended deals with other card providers nearer the time. Egg also charges a 2% balance transfer fee (max. £50), which should be taken into consideration. And it goes without saying that you should aim to clear your balance before the 0% period expires, or you'll be charged interest of 15.9% APR.
However, Egg certainly does seem to be hoping to maintain some customer loyalty, as many cardholders will find it is in their best interest to stick around for the two years. And the ability to obtain two further 0% deals for balance transfers certainly makes life easier for the rate tarts that prefer not to keep applying for new cards -- and means your credit file will be littered with less credit applications, too. Egg also states that it's not just card balances that can be transferred over -- storecard balances, overdrafts, loans and even balances your second cardholder has elsewhere can be shifted over. Egg cardholders can also get up to 10% cashback on any new spending carried out through the Egg site, but as mentioned above, you should tread warily and only use this type of card for new spending in certain situations.
So if you're considering taking out a new 0% card for balance transfers and would find two anniversary offers useful, you should certainly bear the Egg Visa card in mind. And regardless of the 0% card you choose, follow the rules and make sure that you're not stung for any unwanted interest!
You can apply for the Egg card, and a host of others in our Credit Card Centre.
