...a rate tart that is. Here's how 0% balance transfer credit cards size up against their lifetime balance transfer rivals, and how both cards could save you a small fortune.
Managing your finances can be tough at the best of times, but if you’re also juggling several debts at once, hunting down the best deals may be the last thing on your mind.
One form of salvation comes in the form of a 0% balance transfer credit card, which provides a handy shield against hefty credit card interest rates -- and in some cases can give you up to 16 months interest free.
However, unless you’re trying to finance a relatively small debt, you’ll probably take much longer than the 0% grace period given by these cards to pay it off.
There are two things you can do to combat this. The first is to become a tart – a rate tart that is. 'Tarting' (charming, I know) involves periodically switching your debts from one 0% card to another to avoid paying any interest on the balance.
Alternatively, you could opt for a lifetime balance transfer (BT) credit card, which offers a comparatively low APR, which lasts for however long it takes for you to pay your debts off.
But in what circumstances is it better to be a tart, and when are you better off sticking to a lifetime balance transfer?
Let’s find out.
Number crunching
Let’s say over the years you’ve racked up £5,000 of debt on existing credit cards. Let’s also assume that you’re savvy enough to tart between 0% cards until this is paid off.
Here’s how the best 0% card compares to tarting with the best lifetime balance transfer cards when you can afford to pay off £200 a month:
Credit Card | Type of Card | Balance Transfer Rate | Amount Paid In Fees | Total Paid (Fees + Interest) | Time Taken To clear debt |
|---|
Barclaycard Platinum then Capital One* | Interest-free | 0% (2.9% fee) | £145 + £51.60 | £196.60 | 25 months |
Citi Platinum iTunes Rewards | Lifetime balance transfer | 4.9% (3% fee) | £150 | £404.76 | 26 months |
Barclaycard Platinum Long Term Balance Transfer | Lifetime balance transfer | 6.5% (no fee) | £0 | £344.98 | 27 months |
Standard Credit Card | No extra benefits | 18.9% | n/a | £1231.24 | 31 months |
And, if you can only spare £100 a month, here’s how the cards stack up:
Credit Card | Type of Card | Balance Transfer Rate | Amount Paid In Fees | Total Paid (Fees + Interest) | Time Taken To clear debt |
|---|
Barclaycard Platinum then Capital One then Virgin Money* | Interest-free | 0% | £145 + £99.60 + £48.87 | £293.47 | 48 months |
Citi Platinum iTunes Rewards | Lifetime balance transfer | 4.9% | £150 | £696.22 | 53 months |
Barclaycard Long Term Balance Transfer | Lifetime balance transfer | 6.5% | £0 | £762.33 | 55 months |
Standard Credit Card | No extra benefits | 18.9% | n/a | £4012.06 | 86 months |
Two things are clear from the tables above. Firstly, tarting between 0% deals is by far the cheapest way of paying your debts off. And, the more money you can afford to pay off each month, the quicker and cheaper it will be.
Secondly, the less you can afford to pay each month, the more reason you have to hunt out the best 0% deal, then switch to a similar one when this ends.
Theoretically, it is possible to tart three times to pay off this debt without incurring interest charges. If you started off with the Barclaycard Platinum MasterCard, then moved to the Capital One Platinum BT and Purchase card then shifted to the Virgin Money Credit Card, you’d get 47 months interest free – just enough to pay off the debt if you dug a bit deeper in the final months. Complex I know, but it could save you a packet.
So, if you could only afford £100 in monthly payments, tarting in this way will save you and incredible £3,718.59 in interest when compared to a standard credit card with an APR of 18.9% and £402.75 on the nearest lifetime balance transfer rival.
If nothing else, this clearly shows how much you could save by switching to a better deal.
(This of course assumes that the deals in our table will still be there next year when you want to tart again. Still, even if these deals aren't around, it is likely there will be other similar deals around instead.)
Cautionary tales
When tarting, it is important to bear in mind that credit card providers will not allow you to switch your debts between cards issued by the same provider.
So if you already have a Barclaycard, you will not be able to transfer your balance to a different card in the Barclaycard group. Similarly, MBNA will not allow you to transfer your debt between any of its cards. This includes standard MBNA cards, the Virgin Money Credit Card and many football and charity credit cards, so check before applying.
Finally, beware of the consequences of applying for several credit cards within a relatively short space of time. All searches lenders conduct leave a footprint on your credit rating, and may have future implications on your ability to borrow.
Going down the idle road
So what happens if you forget to switch, or are wary of the implications of applying for lots of credit within a relatively short space of time?
Here’s how much interest you’d incur if you took out a 0% credit card but failed to switch to another one at the end of the promotional period – and how this compares to a lifetime BT card when paying £200 a month:
Credit Card | Type of Card | Balance Transfer Rate | Amount Paid In Fees | Total Paid (Fees + Interest) | Time Taken To clear debt |
|---|
Barclaycard Platinum | Interest-free | 0% (14.9% outside promo period) | £145 | £228.64 | 25 months |
Citi Platinum iTunes Rewards | Lifetime balance transfer | 4.9% | £150 | £404.76 | 26 months |
Barclaycard Long Term Balance Transfer | Lifetime balance transfer | 6.5% | £0 | £344.98 | 27 months |
Standard Credit Card | No extra benefits | 18.9% | n/a | £1231.24 | 31 months |
And here’s how things stand if you make a £100 payment but don’t switch:
Credit Card | Type of Card | Balance Transfer Rate | Amount Paid In Fees | Total Paid (Fees + Interest) | Time Taken To clear debt |
|---|
Citi Platinum iTunes Rewards | Lifetime balance transfer | 4.9% | £150 | £696.22 | 53 months |
Barclaycard Long Term Balance Transfer | Lifetime balance transfer | 6.5% | £0 | £762.33 | 55 months |
Barclaycard Platinum | Interest-free | 0% (14.9% outside promo period) | £145 | £999.85 | 56 months |
Standard Credit Card | No extra benefits | 18.9% | n/a | £4012.06 | 86 months |
As you can see, in all cases a 0% credit card is the way to go – apart from if you can only afford relatively low payments and fail to switch at the end of your 0% deal.
So if you're a bit disorganised about tarting and cannot afford large payments towards your credit card bill every month, you may be better off with a lifetime balance transfer credit card
I’ve worked out that when you're not prepared to tart, monthly payments of around £115 or less point towards taking out the lifetime BT on the Citi Platinum iTunes Rewards card, as opposed to the cheapest 0% deal. Of course, this changes according to how much money you owe.
If you do decide to go for a deal over a lifetime BT card, you have to be aware of two things. Firstly, you have to be disciplined. Make a note in your diary of when it is you need to switch, and leave plenty of time to do so. Each day you delay will eat into the savings you’ll make overall.
And, if you are planning to tart in this way, do not under any circumstances succumb to the temptation of spending on your BT card, as hideous interest charges will accrue on top of your bill – a trick called negative payment hierarchy.
At the end of the day, tarting - believe it or not - is an art.... but do it right, and it will definitely pay dividends.
*For the purposes of this calculation, we have assumed that the deals will still be there as you continue to pay off your debts.
More: My Favourite Credit Card / Credit Cards You Rarely See
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