The best balance transfer credit cards
Thursday, 06 January 2011 12:00
by Ben Salisbury
If you went into the festive season with the best intentions in the world but came out the other side with a hazy recollection of spending more than planned, then a personal deficit reduction programme could be the appropriate strategy for you in 2011.
The best way to tackle Christmas debt in the New Year is to transfer any credit card debt to a zero per cent balance transfer credit card and then repay the debt before the interest rate is applied.
What to look for in a balance transfer card
Aim for the balance transfer credit card that gives the longest interest-free period. The best on the market give well over a year, which should be enough time to make serious in-roads into the debt.
If the card gives a low rate on new purchases or other benefits such as no fees on currency then all well and good, but if you want to avoid paying interest on the debt these should be secondary considerations.
If you have not been able to repay the whole debt before the interest-free period ends you can either move the debt onto another balance transfer card - and incur another three per cent transfer fee - or transfer the balance to a lifetime balance transfer credit card which we will come to later.
The top five cards with longest interest-free periods
The market for these cards is competitive at the moment but Barclaycard has just announced a new product that just about beats the competition.
1 - Barclaycard Platinum
This card is the only one that offers a 17-month interest-free period. The balance transfer charge is 2.9 per cent and the balance transfer APR is 16.9 per cent.
2 - MBNA Platinum Plus
This card has a 16-month interest-free period but the charge and APR are slightly better than the Barclaycard Platinum at 2.88 and 16.7 per cent respectively.
3 - Virgin Money MasterCard
This card also has a 16-month interest-free period, the charge is 2.89 per cent but the APR is higher at 18.9 per cent.
4 - Natwest Platinum
This card is only available to existing customers and has a 16-month interest-free period. The transfer charge is 2.9 per cent and the APR 16.9 per cent.
5 - Nationwide Building Society Gold
This one has a lower interest-free period at 15 months, a charge of three per cent and an APR of 16.9 per cent.
Each of the five cards provides an interest-free period of three months on new purchases.
The new arrival, the Barclaycard Platinum card comes out on top, simply because it gives an extra month's interest-free credit and its transfer fee and APR are competitive. However, it is not a card to use for spending apart from the three months at the start, because you will be charged 27.9 per cent.
The other cards also provide pretty good deals so if you don't qualify for Barclaycards offering - you have to be aged 21 or over and have a good credit rating - you can apply for them.
Use the myfinances.co.uk comparison site to find the best deal on a balance transfer credit card.
Lifetime low-interest cards
If you are unable to repay the debt before the interest-free period runs out or if you think this will be impossible then you can apply for a lifetime balance transfer credit card instead.
These credit cards offer a constant but consistently low rate of interest until you have repaid the whole debt. The other benefit is that you won't have to worry about switching cards or pay the fees associated with that.
The best two deals currently on the market come from MBNA and Barclaycard.
1 - MBNA Platinum Visa credit card
This card has a balance transfer rate of just 5.9 per cent but you will pay a fee of two per cent on the balance transferred. It has a rate of 16.9 per cent on new purchases.
2 - Barclaycard Platinum Simplicity Visa
The interest rate on this card is higher at 6.8 per cent but there is no transfer fee and the rate of interest charged on purchases is also 6.8 per cent.
Tips on reducing credit card debt
We have seen the best zero per cent and lifetime balance transfer cards to use for your credit card debts, but there are a few other savvy tips that should help keep fees, interest and charges down.
Never pay the minimum amount as it could be years - or even decades - before you have the debt cleared. If you have more than one debt, prioritise your repayment schedule by paying off the one that attracts the highest rate of interest first.
In most circumstances it is best to repay debts rather than save because the amount of interest you pay will be higher than the amount you receive. This is particularly true at the moment because the Bank of England base rate is so low at 0.5 per cent - and has been for over 18 months.
Use the myfinances.co.uk comparison site to find the best deal on a balance transfer credit card.
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