The longest low rate credit cards

If you've got a stack of debt sitting on a credit card racking up a lot of interest, switch it over to one of these cracking cards...

If you’re a regular reader of lovemoney.com, you’ll be very familiar with the term 0% balance transfer credit card.

The reason we so often bang on about these credit cards is because they are a great way of reducing the amount of interest you pay on your credit card. Most standard credit cards charge interest in the region of 16%-17%. In contrast, a 0% balance transfer credit card will allow you to transfer over a balance from an existing card and pay absolutely no interest on that debt for several months.

In fact, right now, the market leading 0% balance transfer card is the Barclaycard Platinum with 20 Month BT Visa which offers 0% interest for a whopping 20 months – so you won’t have to worry about the interest stacking up on your credit card debt for nearly two years! (Bear in mind there's a 3.2% transfer fee.)

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The only problem with these cards is that you’ll need to pay off your debt in full before the interest-free period comes to an end. If you don’t, the interest rate will jump dramatically – in the case of the Barclaycard Platinum Visa, it will rise to 17.5%. Ouch.

For some of us, clearing our debt within that interest-free period won't be a problem. For others, it will. If it is a problem, you’ll need to transfer you debt to another 0% balance transfer credit card.

But this means you’ll have to pay yet another transfer fee – usually in the region of 3% of the debt – which can soon add up. And if you still haven’t cleared the debt by the time your second interest-free period expires, you’ll be paying out yet another fee to move your debt to a third 0% balance transfer credit card. Not only will this get expensive, but it's also a lot of hassle.

So an alternative might be to use a lifetime balance transfer credit card.

Lifetime balance transfer cards

Quite simply, lifetime balance transfer credit cards offer you a low rate of interest for the lifetime of the debt. This means that you can transfer your debt across and know that the interest will stay low until you’ve paid it off in full. So you won’t have to worry about constantly switching credit cards.

The table below highlights two of the market-leading lifetime balance transfer cards on the market.

As you can see, the MBNA Rate for Life Visa Card offers a fantastically low rate of 5.9% on all balance transfers, and comes with a 2% fee – providing you carry out the transfer within 60 days – otherwise the fee will be 3%.

But another benefit of this credit card is that it also allows you to carry out money transfers. This means you can transfer money from your credit card into your current account and then use this to pay off an expensive overdraft or personal loan and take advantage of the low interest rate.

Again, this comes with a 2% fee providing you carry out the money transfer in the first 60 days – otherwise the fee rises to 4%.

Meanwhile, although the Barclaycard Platinum Simplicity Visa offers a slightly higher rate of 7.9%, this is on both balance transfers and purchases. So if you’ve got a big purchase coming up, this could be a very handy card to have in your wallet.

What’s more, there’s no balance transfer fee – and that could save you a lot of pennies if you have a large balance to transfer.

Another option

There is one other option that I think deserves a mention and that's the Lloyds TSB Advance MasterCard. This card actually offers an even lower interest rate of 4.9% on balance transfers and comes with a 3% fee. It also offers 0% interest on purchases - so it really does beat the two cards I've already referred to.

However, there is one major disadvantage to the card, and that's the fact that these fantastic interest rates are only valid for a certain period. So the 4.9% rate on balance transfers is only valid for 12 months, while the 0% purchases rate is valid for six months.

But this credit card does partly redeem itself again because instead of hiking the interest rate up to ridiculous levels once the promotional periods have expired, you'll receive an interest rate of 11.9%. Compared to the 16%-17% that most other credit cards charge, this is still pretty competitive and as a result, this card is worth some consideration.

What’s more, the Lloyds card will give you a 50% refund on your transfer fee if you transfer £1,500 or more before 30 June.

The calculations

Finally, if you’re not convinced that low APR credit cards are worth it, take a look at the following examples.

Let’s say you had a debt of £5,000 on a credit card with an interest rate of 16.9% and you pay off £100 a month. In total, it would take you six years and ten months to clear your balance in full, during which time you’d have paid out £3,174.47 in interest.

However, if you moved your debt onto the MBNA Rate for Life Visa and took the 2% fee into account (£100 in this case), it would take you four years and 11 months to clear the balance, and you’d pay just £760.38 in interest. So that’s almost two years less than on your standard credit card, and a saving of £2,414.09 in interest.

Of course, the more you can put towards your credit card bill each month, the quicker you’ll pay it off and the more money you’ll save in interest.

So if you’ve got a lot of debt to clear, it’s well worth switching over to a low APR credit card!

More: Get a cracking credit card | Eight tips to clear your credit card debts | Beat inflation with this savings account