Money Insider: Longest not always best in credit card war

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