The new top credit card isn't the one you expect

There is a clear top card on the market, and it's not the one with the longest 0% deal.

Until recently we had two joint-top credit cards for transferring existing debts, so-called “balance-transfer credit cards”, which give you 0% interest in return for a flat fee of up to 3.5%.

The Lloyds card was interest-free for 15 months with a 1.5% fee (after a rebate of some of the fee). Its nearest competitor is Barclaycard's 16-month deal with a 1.6% fee (also after a rebate).

The Barclaycard has a slightly longer 0% period, but also a slightly higher fee. Doing the maths that enables me to accurately compare these apples and pears, the Lloyds card and Barclaycard were equally good value for money for customers who pay off their debts in equal instalments over the length of the deal, both being the equivalent of paying 2.3% APR.

(If you wonder how 1.5% and 1.6% fees could cost the same in pounds as a loan charging 2.3% APR: a fee is paid on the whole debt up front, whereas APR – interest – is split into monthly chunks on what is a declining debt, assuming you're paying the debt off, that is.)

Those two cards have been the cheapest on the market for cardholders repaying in equal instalments, but Lloyds has now removed its rebate on part of the fee, which has doubled its cost. This leaves Barclaycard's 16-month deal as the clear winner.

Barclaycard has two even longer deals that also make it into the top five deals on the market for people who want to pay off their balances in equal instalments, but they don't beat the 16-month deal due to higher fees:

Top five transfer credit cards for paying in equal instalments

The formula I use to calculate this only works perfectly if you pay off the debt in equal instalments in the fastest time that you're able. This means going for the shortest deal that you can with the lowest “equivalent APR”, and repaying by dividing your total debt and fee by the number of months on the deal, and paying that amount off each month.

Hence, a £1,000 debt with a 3% fee is £1,030, and if it's a 12-month deal you divide by 12, which gives you 12 monthly instalments of £85.84.

If you're going to clear your debt quickly

If you intend to pay off your debt quickly, you should pay a lower fee for a shorter deal, or you might find that you saved nothing by switching debt. As it stands, there are no cards currently available to new customers with shorter deals and lower fees than the 16-month Barclaycard, which makes it the best card if you're going to pay off your debt in less than 16 months.

However, if you're going to repay all your debt very rapidly, say, within three months, it might not be worth switching at all. If you pay a 3% fee to switch your debt and pay it off in just three months, you would have paid less in interest if you'd stuck with a credit card charging a whopping 19% APR!

Paying a card off in three equal instalments

That's why there's usually no point switching unless you need around half a year or more to pay off your debt, which can reduce your costs to the equivalent of about 3% APR or less, as shown earlier – and just try finding an ordinary loan that cheap lasting 16 to 22 months!

Pay absolutely nothing

This idea is for real money savers who are organised and disciplined. If you're willing to put in a little bit of effort, you can benefit from virtually zero interest by using longer deals.

To do this, instead of paying in equal instalments, you pay the minimum-monthly amount off, and pay the difference into a top savings account. This way you earn interest on money that you otherwise would have repaid, which pretty much offsets the fee. One month before the 0% deal expires, use your savings to pay off the card.

Watch the traps

Barclaycard continues to seem to want to attract lots of new customers with the best balance-transfer deals. These are fine, but credit card providers expect and hope that you'll make costly mistakes to boost their profits, so ensure you know how to use the cards so you don't incur any surprise costs. Read How 0% credit cards cost you money, 12 ways your credit card rips you off and an update in The interest you pay on “interest-free cards for more information.

Struggling with debt?

If you have no chance of paying off your whole debt, generally it makes sense to go for the longest deals, provided the fee is also low, and to overpay as much as possible. However, if you've missed several repayments or had other problems, you might struggle to get a top balance-transfer card, and applying and being rejected may merely leave another bad mark on your record.

Consider getting free advice to find your best alternative from National Debtline, Citizens Advice Bureau, the Consumer Credit Counselling Service, or an online discussion board or tool such as lovemoney.com's Q&A.

More: Compare credit cards through lovemoney.com | Read Five reasons a balance-transfer card isn't good for you before you get a new credit card.