Focus on: MBNA 5.9% rate for life credit card

Few things in life are guaranteed, but MBNA suggests otherwise with the name of its Rate for Life credit card, which promises to fix the balance transfer rate at 5.9%.

Woman using her bank card

This sounds like a good deal for consumers who have existing balances on cards with higher interest charges as they can transfer the balance and benefit from the lower rate and then not worry about having to shift the balance again and again in pursuit of a good rate.

But does a rate for ‘life’ sound too good to be true? Here’s a closer look at the card’s terms and conditions to see whether the deal is really as good as it sounds.

What’s the deal?

The MBNA Rate for Life credit card offers a rate of 5.9% on balance transfers and on money transfers into your current account made within the first 60 days of opening the account.

Balance transfers are subject to a 1.5% fee and money transfers carry a fee of 4%. The card’s representative APR on purchases is 16.9% (variable).

Any catches?

First, once you’ve paid off the sum you transferred in full, the promotional 5.9% rate ends.

If you pay your bill late or go over your credit limit, MBNA will pull the promotional 5.9% rates and you’ll be charged the standard balance transfer and money transfer rates of 18.9% and 20.9% respectively.

The card can be used to pay off transfers from other credit cards or store cards up to 95% of your credit limit on the MBNA card. But if you want to use it to pay off another finance agreement, such as car finance, you may have to make a money transfer from the card into your current account.

If you did use a money transfer to your current account and then used a debit card to pay off something like car finance, remember that you wouldn’t be covered by Section 75 of the Consumer Credit Act as you would had you paid on a credit card.

Finally, the card has to be managed online with paperless billing.

Verdict

So the rate isn’t quite ‘for life’. Rather, it’s for the life of the balance you transfer onto the card. Once you’ve paid off that initial transfer, the representative balance transfer rate shoots up to 18.9% and the representative money transfer rate goes up to 20.9%.

Still, at 5.9% on balances transferred within the first 60 days of opening the account, the card stacks up pretty well against personal loans.

The best rates on personal loans, which are currently in the region of 5.9%, are only available when you borrow between £7,500 and £15,000. So, if you wanted to borrow less than £7,500 you’d probably struggle to find a personal loan with such a low rate.

If we take the car example again, you could pay for a £5,000 used car on a credit card and transfer the balance to MBNA’s Rate for Life Card. You’d then be able to pay off the balance at a rate usually reserved for personal loans exceeding £5,000.

You should be aware that, if you transfer other debts to the MBNA card but then only pay off the minimum amount due each month to achieve lower monthly payments, it will probably take longer and cost more to clear the debt completely.

Top Tip

There are balance transfer cards such as the Barclaycard Platinum Credit Card with Extended Balance Transfer which offer 0% on balance transfers for fairly lengthy periods. The Barclaycard card, for example, offers 0% for 22 months.

If you’re looking to transfer a smaller amount that you can pay off within that timeframe, a card like this might be more suitable.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We’re free, independent and compare all UK credit cards, as well as offering exclusive deals you can’t get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David’s Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2011.

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