Interest-free credit until the next decade

Competition in the credit card market is fierce at the moment with Barclaycard and Egg having launched new 0% balance transfer offers. This is great news for anyone trying to clear credit or store card debts.


Barclaycard has extended the 0% balance transfer period on its Platinum card – it now runs until January 1 2010 – while Egg is now offering an interest-free period on balance transfers until December 2009.

These offers won’t be around for long though – they are only available until the end of September so you need to act quickly if you want to take advantage.

Don’t pay over the odds for borrowing
There are 30.8million credit card holders in Britain according to the latest figures from Apacs, the UK payments and clearing service, and while 55% clear their balance in full each month, collectively we owe £55.3billion on plastic according to the Bank of England.

It has never been more important to ensure you are not paying more than you need for credit. Over the past two years, the average annual rate of interest charged by credit card providers has increased from 15.65% to 17.45% and over the past 12 months the number of card firms with standard rates in excess of 18% has increased from 19 to 42. Not only is the cost of unsecured borrowing on the up, but rising living costs mean an increasing number of families are struggling to make ends meet.

Therefore, if you owe money on credit or store cards it’s well worth looking into whether you can move it over to a cheaper deal – not only will you clear your debt more quickly but you’ll also have more cash spare to put towards other outgoings.

Take advantage of the leading deals
If you have credit card debts that need clearing, look to take advantage of one of the leading interest-free balance transfer offers – it’s possible to avoid paying any interest on your debt for the whole of next year.

As mentioned above, Barclaycard’s new Platinum deal charges no interest on balance transfers until January 1 2010. You will be charged a transfer fee of 2.9%, although this is added to the debt rather than having to be paid upfront.

Capital One’s Balance Transfer Platinum card also offers a 0% deal on balance transfers that runs until January 2010. The fee is slightly higher on this deal at 3%.

As with all interest-free offers you should aim to have repaid your debts by the time the introductory period ends as the rate of interest leaps. Barclaycard Platinum for example, charges a typical standard annual rate of 14.9%, while the typical annual rate on the Capital One card is 15.9%.

These aren’t your only options if you’re looking to make a balance transfer - there are a host of other competitive deals to choose from:

The Virgin Credit Card, offers 0% on balance transfers for 15 months with a 2.98% balance transfer fee, while the Halifax Plus card also has a 15month 0% introductory offer, with a 3% balance transfer fee. As has already been mentioned, Egg is now offering an interest-free period on balance transfers that runs until December 2009. The transfer fee on this deal is 3%. If you are looking to pay a lower fee, Barclaycard has another option with an attractive 0% period. Barclaycard One Pulse has a 14-month interest free period on balance transfers and the fee is 2.5%.

However, the key to all these deals, is that they should not be used for further spending. This is because the 0% purchase offer is notably shorter on each of these cards than the balance transfer offer – meaning that if you carry out any additional spending you’ll begin accruing interest on these purchases as soon as that offer ends. For example, while Virgin gives 15 months interest-free on balance transfers, the 0% offer on purchases runs for just three months. Most card providers clear the cheapest debt first which means you’ll be accruing interest on the purchases you made until the transferred balance has been cleared. This is known as the negative payment trap.

What if you want to keep on spending?
To avoid the negative payment trap, you’ll need a credit card that offers 0% on both balance transfers and purchases for an equal period.

In this sector there are two cards exclusive to which are the market leaders. The Capital One Balance Transfer Exclusive offers 0% on both purchases and balance transfers until October 1, 2009, while the Capital One Platinum Exclusive offers equal 0% introductory terms until August 1, 2009. Both have a 3% balance transfer fee. While the Balance Transfer Exclusive has the advantage of a longer 0% offer, the Platinum Exclusive has a lower typical rate – at 12.9% compared to 14.9% - meaning it is better suited to those unlikely to move at the end of the introductory term.

Other cards with equal 0% terms on balance transfers and purchases include the Halifax One Online Special and the Bank of Scotland Credit Card, both of which offer 0% for 10 months with a typical rate of 15.9%.

What if you don’t have a good credit rating?
Most 0% balance transfer deals rely on you having a good credit rating – if you don’t, there’s no point making applications as rejections will only further harm your credit score.

If you’re commonly rejected for credit, perhaps because you have defaults or County Court Judgements against you, then you should use our Eligibility Checker tool to find a deal you’re likely to qualify for based on an assessment of your credit profile. Even if you can’t get a 0% deal you could still lower the interest you’re paying each month by moving to a life of balance transfer card with a low rate, such as the Barclaycard Life of Balance at 6.3%, with a 2.5% balance transfer fee.

Other tips to tackle credit card debt
Moving to a more competitive credit card is only part of the issue in wiping out your credit card debt. Here are some more tips:

  • - You will need to change your behaviour to wipe out your credit card debt. Don’t use a 0% card as an excuse to return to spending. Concentrate on paying off your debts first.
  • - Use the restructuring of your credit card debt as a prompt to examine all aspects of your spending – form a budget and prioritise your outgoings.
  • - If you must spend again, set limits and avoid getting buried in debt.
  • - Remember to move to another 0% deal at the end of the introductory term. According to research, around five million customers signed up for 0% deals between April and October last year – these deals may be about to expire and customers will face high interest rates unless they move to a new 0% deal.

Have your say: Do you already have a credit card? If so, how do your rate the provider? Give feedback on your experience with your credit card provider and help others choose the right product.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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