Focus on: Nationwide - Is this the best ever credit card?

Nationwide Building Society has launched the cheapest credit card in years for people looking to transfer existing debts.

Although the card has a shorter 0% introductory period than some other balance transfer cards, its low 0.75% transfer fee means that, in many cases, it’s easily the most cost-effective option – even when compared to Barclaycard’s 31-month card which sits top of the tables because of its longest 0% term.

Kevin Mountford, head of banking at MoneySuperMarket, said: “Nationwide has changed the rules when it comes to assessing the ‘best’ balance transfer card. A card with a shorter promotional period but a low fee can be cheaper than one that wins on best-buy tables due simply to its 0% length.”

We take a look ‘under the bonnet’ of Nationwide’s new card, so you can decide if it could be the right deal for you.

What’s the deal?

Nationwide’s Credit Card offers 26 months at 0% on balance transfers, and has a balance transfer fee of just 0.75%. The average balance transfer fee on the top 10 balance transfer credit cards is currently 2.84%. For someone borrowing £3,000 the difference in the fee would be £62.70 compared to that average.

After the introductory period finishes, the card has a representative annual percentage rate (APR) of 17.9% (variable).

The offer is available on the building society’s Standard Credit card, which is available to all customers, and to FlexAccount customers with a Select Credit Card. However, this card will only be on the table until March 31, so you will have to act fast if you want to benefit.

Who’s it good for?

This card is a great option for anyone looking to transfer existing debts onto a new credit card. And, contrary to our usual message at MoneySuperMarket, this can still be the case even if you can’t be certain you will be able to pay off what you owe during the 26-month introductory period.

For example according to number-crunchers at MoneySuperMarket, if you transferred a balance of £3,000 onto Barclaycard’s Platinum Credit Card with Extended Balance Transfer card, which offers a 0% promotional rate of 31 months, and repaid a fixed £100 every month the total cost of borrowing over this period would be £89.70.

However, if you transferred the same amount onto the Nationwide card, which only has a promotional rate of 0% for 26 months, and again made monthly payments of £100 over 31 months, the total cost of borrowing would be lower at £36.88 –  more than £50 less than Barclaycard, and you would still pay off the whole debt in that time.

Similarly, if you transferred £3,000 onto Halifax’s Balance Transfer Credit card, which has a 0% promotional rate for 30 months, a representative APR of 18.9% after that, and a 3% balance transfer fee, you’d pay £90 in interest and transfer fees over the same 31 months. This is based again monthly payments of £100.

Any catches?

Although the Nationwide card often works out to be a cheaper option than alternative cards offering longer 0% introductory periods, don’t assume that you can take an indefinite amount of time to clear your debt.

Once the 26-month promotional rate finishes, you will be charged interest at 17.9% APR on everything you still owe, so make a conscious effort to pay off your balance as quickly as possible to keep charges to a minimum.

Also, the calculations above are worked out using fixed repayments, meaning you make the same one every month, come rain or shine. If you deviate from this, maybe paying off less in a month, the costs could soar.

What’s the verdict?

Nationwide’s new card could herald a new emerging breed of credit cards with lengthy introductory periods AND competitive balance fees. Prior to this launch, the low fee balance transfer cards tended to offer short-term promotional offers, typically just 12 months. Nationwide has therefore more than doubled the length of the cheapest balance transfer fee deals, which could trigger a balance transfer fee price war as other providers respond.

Credit card companies should be able to see now that it isn’t necessarily all about the race to offer the longest 0% introductory period, but instead about launching cards which offer best value for money overall.

Top tip!

Wherever possible, avoid just making the minimum repayments when trying to clear your credit card debts or it will take you years to pay off what you owe. Minimum monthly repayments are often set at very low levels - typically 3% of the card balance or £5, whichever is greater.  Unless you pay off more than this each month, interest will soon mount up on your balance, making it even harder to clear your debts.

If you get to the end of your 0% deal and still have a hefty balance left over, consider shifting it again to another cheap balance transfer card at that point.

 
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