Picking a balance transfer card

By Emma Lunn

If you're thinking of transferring a balance from one card to another, it's important to look at both the interest rate you'll pay on the new card and the balance-transfer fee. Many cards offer introductory periods with 0% interest, but they make up for it with hefty fees. Others may offer low fees, but their interest deal isn't as attractive. Weighing the variables is a delicate balancing act.

For instance, Tesco Bank recently launched a low-fee balance transfer card. You can transfer your balance for a 0.9% fee. Then you get a less-than-impressive 12 months to pay off the balance and any purchases, at 0% interest. After that, the APR is 16.9%.

The Barclaycard Platinum has no balance transfer fee, but charges 2.9% interest on balance transfers for 15 months. If you transferred £1,000 to the card and repaid the debt in 15 months it would cost a total of £20 in interest. But you don't want to miscalculate your repayment period. After 15 months, the interest rate rises to 18.9% balance-transfer

How long it will take to clear your debt is an important factor when choosing a balance transfer card. "If you know you can definitely clear your transferred balance within the 12 month window, then this new Tesco Bank deal is the cheapest option on the market," says Andrew Hagger, of MoneyComms.

If you know it's going to take longer, you can take the 12-month balance transfer deal, then mark your calendar to move your balance to a different balance transfer card in a year from now. Or, you can look for a card with a longer 0% introductory period now.

The longest 0% balance transfer deal on the market is Barclaycard Platinum with Balance Transfer card. It charges 0% interest on balance transfers for 27 months, but it comes with a 2.99% fee, meaning it will cost you £29.90 to shift each £1,000 of debt. New purchases enjoy 0% financing for only six months. The APR for both purchases and balance transfers after the intro periods is 18.9%.

If you're confident you can clear your debt in full within 21 months, the Lloyds TSB Platinum 21-month deal is a better option. The fee is just 1.5%, meaning it will cost you £15 to transfer every £1,000 of debt. Purchases are charged 0% interest for the first three months, then a representative APR of 17.9%.

"You need to work out how long it will take you to fully repay before you choose your card," Hagger says.

Low- and no-balance trasnfer fee cards
 Card
Intro period incentives on purchases
Intro period incentives on balance transfers
Balance transfer fee
Tesco Clubcard
12 months at 0%; 16.9% thereafter 12 months at 0%, 16.9% thereafter 0.9%
Barclaycard Platinum
6 months at 0%; 18.9% thereafter 15 months at 2.9%, 18.9% thereafter 0%
Natwest low rate Visa
6 months at 0%, 9.95% thereafter 12 months at 2.9%, 9.95% thereafter 0%
Halifax Clarity 12.95% from time card is acquired 12.95% from time card is acquired 0%
RBS Visa low rate 6 months at 0%, 9.9% thereafter 12 months at 2.9%, 9.9% thereafter 0%

See related: How to take advantage of the balance transfer war, A 0% card for damaged credit -- too good to be true?

Published: 16 July 2013