New Capital One balance transfer card helps you rebuild your credit rating

The new Balance credit card from Capital One offers 0% on balance transfers to borrowers with a less than spotless credit record.

Capital One has launched a new 0% interest balance transfer credit card aimed at borrowers with a less than perfect credit rating.

With the Capital One Balance any debt you move onto the card will avoid interest until October 2012. There is also an extremely low transfer fee of just 1.7%, while there’s no annual fee to pay.

As with all Capital One cards, you’ll get a small, manageable credit limit. The card is available to borrowers who in the past have had CCJs or defaults and may only have an average credit rating.

Filling a gap in the balance transfer market

I think this is a fantastic move by Capital One. Up until now the 0% balance transfer market has very much been the preserve of those borrowers with a spotless credit history. That’s all well and good, but the whole idea of balance transfer cards is to help borrowers clear expensive debt, to give them a little more breathing space and time to pay off that balance.

And the borrowers who need that breathing space the most are those who perhaps have missed a payment here or there, and are now trying to get back on their feet.

I’m also pleased to see that the transfer fee is very low. As we looked at in this article on balance transfer fees, the cost of transferring a balance onto a balance transfer card has jumped noticeably in recent months. A fee of 1.7% is pretty reasonable really – on a balance of £1,500 that works out at £25.50.

Balance transfer credit cards are a brilliant tool if used properly, and it is good that Capital One is putting them within the reach of a neglected area of the market with the Balance card.

That said, there is a potential sting in the tail in the shape of the APR, which is a whopping 34.9%. So after those six months are up, if your debt has not been paid off yet, you face some potentially nasty interest payments.

How it compares

Capital One is the only provider to offer a card like this aimed below the top end of the market. As a result, it’s a little unfair to directly compare it with the cards that are tailored for borrowers with spotless credit records.

However, for the sake of accuracy, below are the 15 credit cards offering the longest interest-free period on balance transfers.

*Available to existing current account holders only

As you can see, the very top cards in the balance transfer market offer borrowers the best part of two years free of interest charges, a frankly incredible offer.

The importance of a clean credit rating

What this really demonstrates is just how important it is to maintain a squeaky clean credit record.

If you have a spotless credit history, you have access to credit cards that can allow you to spread the payments on your debt over 23 months. Even the fifteenth card in my table above offers nearly a year and a half without paying any interest.

By contrast, if you have a few black marks here and there, then the best you can get is about eight months from Capital One. That’s a big gap, and could make a significant difference to the health of your finances.

If you want to keep your credit rating spotless, be sure to follow the tips in 10 steps to a perfect credit record and What REALLY damages your credit rating.

And remember that you can get a free trial of Experian's CreditExpert via lovemoney.com, allowing you to keep on top of your credit record and clean up any errors in there!

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