Here comes the all-in-one loan and card

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The Independent Online

Take one credit card, bolt on a personal loan, throw in two different annual percentage rates (APRs) and what do you get?

Take one credit card, bolt on a personal loan, throw in two different annual percentage rates (APRs) and what do you get?

An experimental hybrid from Barclaycard in its hunt for new customers.

The provider describes it as a "new and flexible way" to borrow money and is writing to 100,000 customers to offer the chance to try its Combinations deal in a pilot project.

However, consumer groups warn that its complexity could put people off.

Here's how the deal works: you get a credit card that lets you pay for goods and services in the normal way - with a typical APR of 9.9. But three times a year, you can transfer some or all of your outstanding card balance into the linked personal loan "pot", charging a lower APR of 6.9. You then have to start making monthly loan repayments on this balance.

You can further whittle away your outstanding card and loan balances with overpayment: you can elect to pay down one of the debts or, if you're not bothered, any extra overpayments will by default eat away at the costlier card balance.

To make sure you keep an eye on the level of debt in each pot, Barclaycard will send out an itemised account statement each month.

"The deal is a good way of consolidating debts and a convenient way for less disciplined payers to make monthly payments against both their credit card and loan," says Nick White from price-comparison service Uswitch.com.

However, he warns that offloading the more expensive card debt to the cheaper loan could create "a false comfort zone" for borrowers - acting as a disincentive to pay down the overall debt.

Richard Mason from Moneysupermarket.com, another price-comparison service, advises taking a loan and credit card separately. "As with most packaged products, better value can be found elsewhere."

This includes those on offer at Barclaycard itself. "It already offers a market-leading personal loan at a lower rate of 5.7 per cent, and a credit card with a 0 per cent introductory offer until March 2006," he says.

Elsewhere in the market, there are loans below 6 per cent for those with healthy credit scores. Northern Rock has a rate of 5.7 per cent, while Churchill, Direct Line and Lombard Direct Online offer loans at 5.9 per cent.

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