A new 16 months interest-free credit card

With Barclaycard extending its interest-free offer to become a market-leader, we reveal which 0% balance transfer cards you should have in your wallet.

Racking up lots of debt on your credit card can be easy to do – particularly at this time of year when many of us have been on our summer holiday or are just about to jet off on one.

So that’s why, here at lovemoney.com, we regularly encourage you to transfer any credit card debt onto a 0% balance transfer credit card – because that way, you won’t have to pay any interest on your debt during the 0% period.

But which card offers the longest 0% period at the moment?

Barclaycard battles on

For a while now, the top offerings for 0% balance transfer cards have come from Yorkshire/Clydesdale Bank and the Natwest Platinum Credit Card and Royal Bank of Scotland Platinum Credit Card – all of which offer an interest-free period of 16 months.

The Barclaycard Platinum card, meanwhile, has only been slightly behind, offering an interest-free period of 15 months. However, last week, Barclaycard announced it was increasing its rate to 16 months interest-free – meaning it is now joint market-leader.

So what does this mean? Well, quite simply, it means we’ve all got another top card to consider when deciding which 0% balance transfer card to go for. However, I also think it means we’re likely to see a few more changes in the market.

With credit card giant Barclaycard stepping up a gear and launching headfirst into a market-leading position, there’s a very good chance some of the other players at the top of the market will find they cannot compete and take a step backwards. And, once the other cards are no longer in the running, Barclaycard will have a monopoly on the market - and a clear field to reduce its 0% period back down to 15 months.

So while it might seem like increased competition is a good thing, actually, when a giant like Barclaycard enters the fray, it can mean things take a turn for the worst. If you like the cards that are on offer now, I'd suggest you act fast to get your hands on one of them.

The best cards in town

Let’s take a closer look at the top 0% balance transfer cards on the market:

It’s worth bearing in mind here that you can only apply for the Yorkshire/Clydesdale Bank Credit Cards online if you are an existing customer. If you’re not, you’ll have to apply in branch – and if you live down south, branches are few and far between. These cards also come with a slightly higher transfer fee of 3%, compared to the 2.9% that comes with the Barclaycard Platinum Credit Card, NatWest Platinum Credit Card and Royal Bank of Scotland Platinum Credit Card.

And if you’re looking at the Halifax Customer MasterCard, be warned that you need to be a Halifax current account holder to apply.

As you’ve probably noticed, as well as those credit cards offering 16 months interest-free, there are a lot of 15 month 0% balance transfer credit cards on the market right now, so there’s plenty of choice. You can view a full break down of these cards in Nine extremely long interest-free cards.

However, if you have a lot of debt to transfer across from your existing credit card, that extra month interest-free could make the world of difference – in which case you might want to snap up one of the 16 month interest-free cards as soon as possible!

Just remember to pay off your balance in full before the interest-free period comes to an end – otherwise you’ll get hit with an interest rate of 16.9% which may be a bit of a shock to the system. So get ready to transfer your debt across to another 0% balance transfer card if you don’t think you’ll pay it off in time.

That said, bear in mind, you can’t usually transfer a balance from one card to another if they are both issued by the same banking group. For example, NatWest and Royal Bank of Scotland are both members of the Royal Bank of Scotland Group so you can’t move balances between the two. You can find a full list of credit card issuers in The secret truth about your credit card.

Don’t get caught out

An important point to remember whenever you’re using a 0% balance transfer credit card is not to use it for purchases as well. That’s because if you do, you’re likely to get caught out by a sneaky trick called negative order of payment. This is where any payments you make towards your credit card are put towards your cheapest (ie, your interest-free ) debts first, leaving your most expensive debts to rack up interest.

That said, from January 2011, all lenders will have to employ positive order of payment - so your payments will go towards your most expensive debts first. Some credit card companies have already implemented the change, while others have yet to do so.

However, until negative order of payment is a thing of the past, to ensure you don’t get caught out, only use your 0% balance transfer credit card for balance transfers, and use a 0% on new purchases card for any spending you want to do. The Tesco Clubcard Credit Card, for example, offers a market-leading 13 months interest-free on all purchases.

Make your payments on time

Finally, when using a 0% balance transfer credit card, always remember to make your monthly payment on time. Failure to do so could mean your card provider will cancel your 0% deal there and then – meaning that instead, you’ll be hit with a hefty interest rate. Missing payments could also have a negative impact on your credit record.

To prevent this from happening, set up a direct debit to automatically make the minimum payment each month – or more than the minimum if you can afford to do so.

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