Christmas debt relief: Best balance transfer deals
By Emma Lunn
Borrowers looking to transfer existing credit card debt to a cheap card are in luck: credit card firms are waging a price war and it's customers who are winning.
The past few months have seen a number of competitive balance transfer deals enter the market, with some credit cards offering as much as 24 months interest-free.
Zero per cent balance transfer cards are good for people who want to pay down large balances because all payments will go towards paying off the capital owed rather than interest.
"If you've got a balance on your credit card that you know you're not going to be able to clear in the next two or three months, it's a smart move to switch it and take advantage of an interest-free deal," says Andrew Hagger of MoneyComms.
For example, if you have a £5,000 balance on a card with an APR of 17% and paid £100 a month, you'd pay about £760 in interest over a year. If you switched the debt to, for example, MBNA's Everyday Visa credit card with a 2% balance transfer fee and 17 months interest-free, you'd pay a £100 fee but no interest in a year. This would save you £660 over the course of a year.
If you're willing to sacrifice a lengthy 0% period for a lower balance transfer fee, it's an option to consider.
"You need to consider the length of the 0% deal, but also weigh up the one-off balance transfer fee before choosing your interest-free card," Hagger says.
While cards with 0% introductory periods of 20 months or more will generally charge a fee of 2.8% to 3.5%, you can probably find a 1% to 1.5% fee on cards with shorter introductory periods of 12 to 14 months.
No matter which card you choose, there's one overarching strategy to keep in mind, Hagger says.
"To make sure you make the most of your balance transfer deal, pay off as much as you can afford before the introductory deal finishes, and if you can't clear it all in time, apply for a new 0% card a couple of months before your deal expires. That way you can switch again before the go-to rate of 18% or 19% APR or more kicks in," Hagger says.
Looking for a good balance transfer card to take the sting out of festive season spending? Here are some options:
This card offers the longest balance transfer deal on the market at the moment, with a massive 24 months interest free. After that, the APR is 17.9%. The balance transfer fee is 2.8% meaning you'd pay £28 to transfer £1,000 to the card.
Nearly matching Barclaycard, this card offers 22 months interest free but has a higher balance transfer fee of 3.5%, meaning it would cost £35 to move a £1,000 balance to the card. After the interest-free period expires, it has an APR of 17.95%.
Tesco Bank Clubcard Credit Card for balance transfers
Tesco Bank offers another lengthy balance transfer period at 22 months. The card has a balance transfer fee of 2.9%, meaning you'd pay £29 to transfer £1,000 of debt to the card. The card is also connected to Tesco's rewards program, xo cardholders earn Clubcard points (which can be exchanged for in-store vouchers) for spending on the card. It has a regular APR of 16.95%.
Barclaycard Platinum (low handling fee version)
If it's a low fee you're after, rather than long 0% period, this Barclaycard Visa has a fee of just 0.9%, meaning it would cost just £9 to transfer £1,000 of debt to the card. The 0% period then lasts for 12 months before reverting to an APR of 19.9%.
Published: 5 December 2012
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