Money Insider: Longest not always best in credit card war
Friday 24 January 2014
The battle between credit card companies striving to offer the longest zero per cent term for balance transfers has moved up a notch in the past four or five weeks.
In the week before Christmas Barclaycard was sitting comfortably at the top of the pile, occupying number one spot in the best-buy tables with the leading interest-free balance transfer terms of 29 months.
Then out of the blue MBNA gatecrashed the party and matched the 29-months term, shortly followed by Tesco Bank and Santander also offering zero per cent for one month shy of two and a half years.
As expected within a matter of days Barclaycard retaliated with a new 30-month deal (2.89 per cent fee) and 29 months (new lower 2.49 per cent fee) to again dominate the top two positions. The reason behind these moves has little to do with yearning to offer the customer a more attractive deal. The real driver is a hard-nosed marketing strategy to appear at the top of the best-buy tables on the big comparison websites to maximise the volume of business this delivers.
If you are financially disciplined, there are some good savings to be made. For example if you borrowed £3,000 interest free with the latest long-term Barclaycard offer your only cost would be the £86.70 (2.89 per cent) balance transfer fee. If you paid £102.89 per month for 30 months the balance and fee will be cleared with no interest charges to pay.
By comparison if you wanted to clear a £3,000 balance on a card at the market average of 17.4 per cent APR in 30 months you'd have to pay £123 per month, some £580 more expensive over the full term than the zero per cent deal above.
Just because lenders appear to be tripping over themselves to offer longer-term interest-free deals it doesn't mean they are easier to get hold of.
You will need a near-perfect record to get the best deals and if yours doesn't meet the criteria you may be offered a shorter zero per cent deal, possibly a higher interest rate and also a fairly small credit limit – while others will find their applications declined.
If you are accepted, make sure you don't exceed your limit or miss a monthly payment as the lenders use this as a handy get-out clause to terminate the introductory promotional deal on the spot.
Another tip for savvy borrowers is, don't blindly opt for the card with the longest interest-free period unless you intend on using it for the full term.
It's not uncommon for customers to switch to zero per cent and then switch away again or repay the balance well before expiry, so for many people the balance transfer fee is also a key area if they want to keep costs to a minimum.
The one-off balance transfer fee is much cheaper if you opt for a term which is three or four months shorter than the table-topping cards. For example by picking the Barclaycard Platinum Card at 25 months the balance transfer fee is just 1.5 per cent or with the MBNA Everyday Card at 18 months it is also 1.5 per cent, both well below the 2.89 per cent charged by Barclaycard on its 30-month card.
If you're someone that knows you can repay over a much shorter timescale, perhaps from an annual bonus, then the Fluid Low Fee card offers one year interest free with a balance transfer fee of just 0.75 per cent.
When zero per cent credit card deals hit 25 months, many thought that was as far as they'd go, but with competition for those prized best-buy slots as keen as ever, I wouldn't rule out a 32 or 33-month interest-free card by the end of 2014.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israel hide facts
- 4 Danish TV reporter is all business up top, all party down below
- 5 Ross Burden dead: MasterChef and Ready Steady Cook star dies at age 45
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
iJobs Money & Business
£30000 - £34000 Per Annum 25 days holiday, Private healthcare: Clearwater Peop...
£400 - £450 per day: Orgtel: Business Analyst - Credit Risk - Banking - London...
£500 - £600 per day + competitive: Orgtel: My client, a leading bank, is curre...
£20 - £22 per hour + competitive: Orgtel: Senior Fund Administrator, Top Four ...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000