Barclaycard halves balance transfer fees

Barclaycard is slicing its balance transfer fees in half across its credit card range. But you need to move quickly to take advantage.

From today, the market leader in credit cards, Barclaycard, is halving the transfer fees it charges customers for moving expensive card debts to one of its 0% balance transfer credit cards.

As a result, Barclaycard has the UK's two best 0% deals. However, this special offer ends in one month, so you'll need to move quickly to take advantage.

Pay no interest with 0% balance transfers

Although the Bank of England's base rate has been firmly stuck at 0.5% a year since March 2009, the cost of borrowing on credit cards continues to creep up. If you spend on your plastic and don't repay your balance in full every month, then you'll pay steep rates of interest on this debt.

Right now, the average yearly interest rate charged by credit cards is over 19% APR. This means that a typical credit charge will charge interest of £190 a year on a flat balance of £1,000. This is an extremely expensive way to borrow money, especially in the long term.

This is where 0% balance transfer cards can save you a fortune. By transferring your existing card balance(s) to a 0% deal, you can avoid paying any interest on these debts for an extended period. In fact, the longest 0% periods currently on the market lasts for 23 months, giving you nearly two years of interest-free credit.

Don't forget the fee

However, there is a catch, as all 0% balance transfers charge you a fee for moving your existing balances to them. Typically, this fee is 3% of the sum transferred, which comes to £30 for every £1,000 shifted across.

Therefore, when weighing up 0% balance transfers, you must check two things:

How long the 0% offer lasts (the longer, the better).
How much the fee is (the lower, the better).

In short, before grabbing the latest 0% deal, be sure to check both of these features.

The best balance transfer deals

To save you the hassle of shopping around, I've already crunched the numbers for you. I've ranked these five Best Buys from best to worst:

Card	0% deal	Transfer fee	Purchase rate	Notes
Barclaycard 21Mth Platinum Visa	21 months	1.3%* Min: £7.25	17.9% APR	Transfer fee halved until 9th August.
Barclaycard 22Mth Platinum Visa	22 months	1.45%* Min: £7.25	17.9% APR	Transfer fee halved until 9th August. No interest on purchases for three months.
HSBC Visa	23 months	3.3% Min: £5	17.9% APR	The UK's longest 0% transfer. No interest on purchases for three months.
NatWest Platinum MasterCard	22 months	3.2% Min: £5	17.9% APR	No interest on purchases for six months
Halifax MasterCard	22 months	3.5%	17.9% APR	Minimum income of £20,000 a year. No interest on purchases for three months.

* Half of your transfer fee will be refunded within 28 days of transfers being processed. Offer valid only for new Barclaycard customers.

Given the strong similarities between these deals, you can see how fierce the competition for balance transfers is. All five cards have a standard purchase rate of 17.9%, while all five balance transfers last from 21 to 23 months.

Nevertheless, the two Barclaycard deals are the clear winners, even though HSBC's 0% deal is longer at 23 months. This is because both Barclaycards charge a transfer fee of either 1.3% or 1.45% until 9th August (after which the fee doubles to the original leve). In contrast, HSBC's transfer fee is 3.3%, NatWest's is 3.2% and Halifax's is 3.5%.

Why Barclaycard is the winner

To see how much cheaper the two Barclaycard deals are, take a look at the table below. This shows the fee payable on each £1,000 transferred, plus the monthly cost of this fee when spread over the life of each 0% deal:

Card	Fee per £1,000	No. of months	Fee per month
Barclaycard 21Mth Platinum Visa	£13	21	62p
Barclaycard 22Mth Platinum Visa	£14.50	22	66p
HSBC Visa	£33.00	23	£1.43
NatWest Platinum MasterCard	£32.00	22	£1.45
Halifax MasterCard	£35.00	22	£1.59

As you can see, Barclaycard's 21-month deal is the cheapest by far. It works out to a monthly fee of 62p to transfer £1,000 and enjoy 21 months of interest-free credit. In second place is the 22-month Barclaycard, costing 66p a month.

All three remaining deals are at least twice as expensive as the Barclaycard deals, thanks to transfer fees of £1.43 a month at HSBC, £1.45 at NatWest and £1.59 a month at Halifax.

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Lendwithcare.org.uk, is a ‘crowd-sourcing, micro-loans’ website. Simply put, a number of people group together to lend money directly to small business owners in developing countries.

Last year CARE International UK, a charity tackling poverty and hardship, linked up with The Co-operative to promote the lending initiative. Since then more than £1 million has been lent via the website to entrepreneurs in countries like Togo in West Africa or the Philippines.

That’s over 26,000 loans to people in deprived countries who desperately want to make a living and make it sustainable.

How does it work?

You can lend from as little as £15 and the money goes directly to small-scale entrepreneurs, including hairdressers, general store owners or farmers raising livestock.

You can read profiles about the people looking for finance on the website, along with their business proposals, and then choose who you want to lend to. The sum already invested by other lenders is also shown alongside what is still needed for the borrower to get started.

Once the business starts to grow, the entrepreneur will make repayments. When the loan is fully repaid, you can re-invest it in another business, donate the sum to CARE or withdraw the cash.

Last Christmas some of my relatives gifted me a sum to invest via Lendwithcare. I lent £15 to Heng Kuy, a married mother of four who raises and trades livestock in Cambodia. So far she has made steady repayments and has paid back nearly half of my original loan.

When (or if) it’s fully repaid, I look forward to reinvesting in another small business. This is the aspect many of the site’s investors love – the fact a small sum of money can be continually recycled to help another person help themselves.

Of course there’s no guarantee you will get your money back as small businesses often struggle to survive in any part of the world. But lenders aren’t usually worried by this as the loan is given in the same context as a charitable donation.

What is microfinance?

It’s a way of providing financial services – such as small loans – to people who would otherwise struggle. Often this is in the most poverty-stricken and remote areas of the world.

Someone with a business idea can approach a microfinance institution (MFI) for help. These can be local banks, which have worked with organisations like CARE for a number of years.

The MFI then organises a loan and the money you stump up replaces that, so you’re directly financing the entrepreneur.

This type of initiative has grown in popularity but there are some negative aspects too – mainly the interest charged to the entrepreneurs by the intermediaries. Annual interest rates imposed by MFIs typically falls between 20% and 30%, which looks steep.

On the flip side, setting up a bunch of small loans can be timely and costly, and local moneylenders can charge much higher annual interest rates, with figures running into the hundreds.

Lendwithcare says it would not consider working with MFIs charging excessive interest rates and sometimes their partners reduce rates because of the cheaper source of funds coming in through the website.

Are there any other ways to lend or invest ethically?

The socially responsible Triodos Bank operates a Microfinance Fund, which offers financial services to poor workers in the likes of Africa, Asia, Latin America and Eastern Europe.

The minimum investment is much higher at £50,000 and it works less like a charity since it aims to provide annual returns of between 6% and 9% over the medium term. However, as with any investments returns can never be guaranteed. Neither can you be certain of getting back the full sum you invested.

Alternatively, you can give a much smaller £10 loan to workers in developing countries through Deki.org.uk.

Oxfam offers ethical gifts such as a £5 share in a farmyard. The money isn’t a loan but a donation used to help people build their small-scale businesses.

You can also buy fertiliser for £5, a small business loan for £9 or train a beekeeper for £12.