Money Insider: Take a long view for 0% on your balance transfer
Friday 29 March 2013
The battle between credit card companies striving to offer the longest zero per cent term for balance transfers shows no sign of fizzling out. The latest moves in this field means that it's now possible to borrow interest-free for 26 months if you meet the credit scoring criteria.
Just over a week ago Barclaycard was sitting comfortably at the top of the pile, occupying the first two places in the best buy tables with interest-free balance transfer terms of 25 months (2.9 per cent fee) and 24 months (2.8 per cent fee).
Then out of the blue Tesco Bank gatecrashed the party and launched 25 months with a 2.9 per cent fee and so was joint top with Barclaycard.
Within hours Barclaycard hit back with a record 26-month deal (3.5 per cent fee) and 25 months (new lower 2.80 per cent fee) to once again take control of the top two positions.
These moves have little to do with wanting to offer the customer a more attractive deal, the real driver is a marketing strategy to appear at the top of the best buy tables and get the volume of business that 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 £105 (3.5 per cent) balance transfer fee. If you paid £119.42 per month for 26 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 18.1 per cent APR in 26 months you'd have to pay £139 per month, some £509 more expensive than the 0 per cent deal above.
Just because the lenders look as if they are falling over themselves to offer long-term interest-free deals it doesn't mean they are easier to get hold of.
You will need a very good credit record to get the best deals and if yours doesn't meet the criteria you may be offered a shorter 0 per cent deal, possibly a higher interest rate and also a fairly small credit limit - others will be less fortunate and find their applications declined.
If you are accepted for one of these products, 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 using it for the full term.
It's not uncommon for customers to switch to 0 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 factor to keep costs to a minimum.
The one-off balance transfer fee is much cheaper if you opt for a term three or four months shorter than the table-topping cards. For example by picking the Lloyds TSB Platinum Card at 21 months the balance transfer fee is currently just 1.5 per cent or with the MBNA Platinum Card at 22 months it is 2 per cent, both well below the 3.5 per cent charged by Barclaycard on the 26-month deal.If youcan repay over a much shorter timescale, then the Nat West Platinum card has 13 months interest-free with a balance transfer fee of just 1 per cent.
When 0 per cent deals hit 20 months many people thought that was as far as they'd go, but with competition for those prized best buy slots as keen as ever, don't rule out a 30-month interest-free card by the end of the year.
Always shop around for that personal loan
Sainsbury's Bank is proud of its unique price promise with its personal loans, whereby if you can get a cheaper deal than the one agreed by Sainsbury's within 28 days it will match the rate and give you an additional 0.1 per cent APR discount.
Exclusive figures revealed to The Independent show that during 2012 customers taking advantage of this promotion cut their rate by an average of 1.77 per cent APR.
With the average loan under the price promise approximately £11,800 and a term of 53 months, many customers benefited to the tune of around £475 to £500 in lower interest charges.
This just highlights that it's worth shopping around when looking for a personal loan and not to plump for the first offer you receive.
Andrew Hagger is an independent personal finance analyst from moneycomms.co.uk
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