Money Insider: Longer isn't always better on credit cards
Saturday 19 July 2014
The battle between credit card companies striving to offer the longest zero per cent term for balance transfers shows no sign of tailing off, as another high-profile deal has just been launched.
This week Tesco Bank kept the pressure on Barclaycard, MBNA, Santander and Halifax, as it increased the term of its zero per cent balance transfer deal to 32 months, just one month shy of the market leading deal.
If you are financially disciplined, there are some good savings to be made, but recent separate reports from Zopa and NatWest both highlighted the potential financial costs if these cards aren't managed properly. Both also revealed that many people fall off the zero per cent wagon mid-term and end up incurring significant interest charges.
But if you're careful you can make a substantial cost saving.For example, if you borrowed £3,000 interest-free with the latest long term Barclaycard offer, your only cost would be the £89.70 (2.99 per cent) balance transfer fee. If you paid £93.62 per month for 33 months, the balance and fee will be cleared with no interest charges to pay.
But if you wanted to clear a £3,000 balance on a card at the market average of 17.4 per cent APR in 33 months, you'd have to pay £114 per month, £672 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 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 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 they should consider 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 slightly shorter than the table topping cards: by picking the Post Office 0% Card at 18 months, the balance transfer fee is currently just 0.7 per cent, or with the MBNA Everyday Card at 21 months at 1.5 per cent, both well below the 2.99 per cent charged by Barclaycard on its 33-month card.
If you're someone who knows you can repay over a much shorter timescale, perhaps from an annual bonus, then the Sainsbury's bank Nectar card and Fluid Low Fee credit card both offer one year interest-free with a balance transfer fee of just 0.50 per cent.
Only three years ago it was extremely rare to find an interest-free balance transfer card with a term of 18 months or more, but the desire by the biggest credit card companies to acquire more customers has seen the length of these deals increase almost on a monthly basis.
When zero per cent balance transfer deals hit 30 months, some experts predicted that was as far as they'd go, but with so much competition for the prized "best buy" slots on the league tables, I wouldn't be surprised to see a three-year term on an interest-free card before the year is out.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Lincoln MP Karl McCartney 'denied all knowledge' of the Twitter activity
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
Money Insider: Would £150 make you switch banks?
Why the City Watchdog is concerned with the credit card industry
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
Gold-plated pensions – the key to retirement freedom?
- 1 Sean Abbott: Messages of support flood in for bowler following death of batsman Phil Hughes
- 2 Exodus Gods and Kings: Ridley Scott never considered casting 'Mohammad so-and-so from such-and-such' in lead role
- 3 This letter from a reader explains why women can’t play football
- 4 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
- 5 Scientists predict green energy revolution after incredible new graphene discoveries
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Rochester aftermath: Sacking of Emily Thornberry will make work of Labour MPs '10 times harder'
iJobs Money & Business
£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...
£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...
£30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...
£Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
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