Can you benefit from a 'double-duty' 0% credit card?
By Benjamin Salisbury
In the competitive credit card market, the length of low- or no-interest deals for purchases and balance transfers is getting longer. Some balance transfer deals give you up to 37 months to pay off your balance without incurring new interest charges; other deals waive interest charges on purchases for up to 27 months.
However, you may find that when you get a good balance transfer deal, you get only a minimal purchase deal, and vice versa. If you're trying to tackle debt while still using your card, you may need both: a good deal on a balance transfer and on purchases. Thanks to "double-duty" credit cards, you're in luck. These products offer lengthy interest-free deals on both purchases and balance transfers.
Andrew Hagger, founder of finance website MoneyComms, says market competition has helped bring about these new products.
"A year ago, you might get 12 months at 0% for both purchases and balance transfers, but the new terms on offer have increased and forced different providers to gradually raise rates to up to double that," says Hagger. "On top of that, reductions in personal loan rates mean credit card providers have improved terms to compete with that market."
out for pitfalls
While double-duty cards can be a good deal, it helps to keep a few caveats in mind. For instance, don't get tempted by the 0% interest into spending more than you'll be able to pay back before the interest-free period is up, especially if you're using the card as a tool to tackle debt. You don't want
to add to your debt pile and end up in the same place, or worse, when the deal is over.
"You have to manage credit card repayments yourself, which can be harder than repaying a personal loan, where monthly repayments work like a direct debit and you gradually reduce the loan," says Hagger. "Don't let the amount you owe creep up again."
You must also factor in the balance transfer fee; some cards are fee-free, but chances are, you'll have to pay up to 3% for a balance transfer. Additionally, you might have a specific window in which to transfer a balance. And be sure you know what the interest will be once the promotional period is over.
With many cards, you must transfer any balances within the first 90 days of having the card to get the promotional rate. You could also lose the promotional rate by going over your credit limit or failing to make payments on time.
Finally, be aware that you may not get the best rate or interest-free period advertised, as only about half of applicants receive the best deals.
a double-duty card
Even in this narrow category of cards, it's important to carefully choose the one that best suits your needs. For instance, you may want a cash-back card, the card with the lowest balance transfer fee or the card with the lowest interest after the deal expires.
"Across the industry, companies design a range of different products for different needs, such as for people wishing to spread the expense of a big purchase or those looking to reduce the cost of existing credit," Richard Koch, head of policy at The UK Cards Association, said in an emailed response to questions. "It's always important for consumers to consider their options and choose a card with features that best suit their needs."
When comparing cards, consider the elements in the chart below. These deals are current as of December 2015, but Hagger thinks the length of interest-free periods could rise further. "When the market reached 24 months on interest-free balance transfers, I thought it would stop, but now we have products offering 37 months."
|Double-duty cards on offer
|Card|| Interest-free period
||Balance transfer fee
||Annual fee||Rate after introductory period
|Sainsbury's Nectar Dual Offer||21 months
||18.95%||In your first 3 months, you’ll earn 2% of your Sainsbury’s spend back in Nectar points, equivalent to 4 points for every £1 spent on Sainsbury’s shopping and fuel. After 3 months this drops to 2 points for every £1 spent. You earn 1 point for every £5 spent elsewhere.|
||N/A||£36||16.5%||This card offers 1% cashback at supermarkets on a spend of up to £300 per month; 2% at major department stores, up to £150 per month; and 3% cashback at petrol stations, and on rail and tube travel on a combined spend of up to £100 per month.|
||20 months for balance transfers made in the first 3 months. 26 months for purchases made in the first three months, 20 months otherwise.||2.98%||N/A||19.9%||40% discount on AA European breakdown cover on trips of 3 days or more.|
||24 months. Balance transfers must be made within the first 3 months to get promotional offer.||2.5% for transfers made in the first 3 months; 3% after||N/A||18.9%|
||20 months. Balance transfers must be made within first 60 days.||3%, but reduces to 1.49% via refund
||N/A||18.9%||You also receive Barclaycard Freedom reward points and the card can be used to make contactless payments for transactions of £30 or less.|
|Post Office Matched
||27 months for purchases made in the first 3 months; 16 months for balance transfers made in the first 3 months.||2.98%||N/A||18.9%||No fee to buy foreign currency (“travel money”) at the Post Office, free purchase protection insurance.|
Published: 8 December 2015
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