If you can't afford to pay off your cards in full this month, look to take advantage of a competitive balance transfer offer. But you should apply now as providers are reducing the attractiveness of some deals.
Why the best deals are disappearing
In 2007 there were more than 200 providers offering lengthy 0% balance transfer deals - now there are only a handful left as the ongoing credit crunch takes its toll. For more information on why the market is contracting watch our video, 'Outlook for credit cards in 2009'.
Having been a major player in the 0% balance transfer market, Capital One stopped offering interest-free cards last autumn and although a number of providers remain, the deals available have been watered down. We've recently seen Halifax reduce the interest-free period on its One card from 10 months to nine while the 0% period on the Halifax Plus has been cut from 15 months to 12 months and HSBC now only makes its 0% balance transfer card available to its current account customers.
So what deals remain?
Despite these changes, there are still some good deals available. The Virgin Credit Card has the longest interest-free offer on balance transfers at 16 months. There is a 2.98% balance transfer fee and you are not charged interest on purchases for six months. Once the 0% period is over you will be charged the standard rate of interest which is typically 16.6%.
Elsewhere, HSBC offers 0% for 15 months with a 2.9% fee on its HSBC Bank Credit Card, but this deal is only available to its current account customers. For everyone else there are a host of providers offering 0% on balance transfers for 14 months including the Barclaycard Flexi-Rate, OnePulse Special and Platinum cards all of which carry a 2.9% fee and a typical rate of 14.9%; the Lloyds TSB Platinum Mastercard with a 3% fee and 15.9% typical rate; and both the Tesco Bonus Credit Card with a 15.9% typical rate and the Tesco Clubcard Credit Card with a 16.9% typical rate - both Tesco cards have a 2.9% balance transfer fee.
Remember that once the 0% period ends you must switch to another 0% deal or you'll start paying interest at the typical rate.
Warning: you may not qualify
Because credit card firms are more cautious about who they will lend to you may not qualify for one of the deals listed above. The leading products are only available to those with excellent credit scores. Our Smart Search tool will enable you to evaluate your credit profile before applying for a deal so you get an idea of which products you are likely to qualify for.
If your credit rating isn't good enough to make you eligible for one of the market-leading 0% deals you can still pick up a competitive deal on a low rate card. These offer a low rate that lasts until the balance is cleared. This type of card is proving increasingly popular as you don't have to worry about switching onto another deal when the introductory 0% offer ends.
The Barclaycard Simplicity is the market-leading card in this category with a rate of 6.8% on purchases and balance transfers. The card has no balance transfer fee. The Capital One Fixed Rate Card is also competitive at 8.5% on balance transfers until August 1, 2012 with no balance transfer fee.
It is important not to make too many credit applications within a short period of time as it can have a negative impact on your credit score. So be careful if you have an application declined.
You may find you don't actually need a new credit card in order to benefit from a preferential rate. If you already have more than one credit card, contact your existing providers - many periodically run special offers for existing customers. You are unlikely to be offered a 0% deal on balance transfers but you may be offered an attractive low rate for six or nine months, which could help as you try to clear your Christmas debts. If you are offered such a deal, make sure you don't have an existing balance on that card - this is because you'll be charged a different rate of interest on that debt.
If you do, move it over to one of your other cards and then transfer the entire amount back onto the card giving you the special balance transfer offer.
Don't forget the golden rule
The golden rule to those transferring balances is not to use the card for more than one purpose ie. don't use the card for spending as well. You will probably be charged a higher rate of interest on any purchases you make and most card providers use your monthly payments to clear the cheapest debt first. This means your payments will be used to clear the transferred balance first, leaving you accruing interest on the purchases you made at the higher rate.
The only exception to this rule is if the card offers interest-free periods on both transfers and purchases which end at the same time.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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