Interest-free credit cards are seldom the good deals they seem

Click to follow
The Independent Online

Barclaycard's new 24-month offer of free credit looks great, doesn't it? After all, if you transfer £3,000 from a competitor's credit card with an APR of 18.9 per cent, Barclaycard says you'd save £935 in interest payments over the two-year period.

But there are several things wrong with the deal that should make you think twice before signing up. For starters, you'd only save that much interest if you intend to make no repayments at all on the card over the next two years, and you'd be foolish to do that. The more sensible approach would be to use the interest-free period to clear the debt you owe.

However, even then you'll have to pay a hefty 2.8 per cent upfront transfer fee to the plastic card company when you switch, which works out at £84 if you transfer £3,000. That means that if you hope to pay off your card more swiftly, you'll have to work out whether the total monthly interest you'd be charged would work out more than the transfer fee.

There's also the fact that, at a typical 17.9 per cent, the Barclaycard Platinum is far from the cheapest card on the market. If you intend to continue using the credit card after the interest-free period, the relatively high charges will quickly rack up, eating into any saving you may thought you had made.

For that reason you may actually be better off applying for a cheaper card. Barclaycard itself has one: the Platinum Simplicity card charges a typical APR of just 7.9 per cent. If you owe £3,000, you'd save £300 every year by having that lower card rather than the higher Platinum card.

There's also the risk that simply applying for the new deal could hit your finances. Barclaycard is choosy about customers, turning down one in two. Get turned down and that'll be recorded on your credit file. More than one refusal and you'll soon be seen as a risk, meaning you'll be charged higher rates in future. In short, applying could prove to be a costly mistake.

Looking for credit card or current account deals? Search here