Balance-Transfer Cards The Next Victim Of The Credit Crunch?
It's been a year since we last made a forecast about what will happen with credit cards. Now it's time for an update.
This article was first sent to Fools as part of our 'The Good, The Bad and The Ugly' email series.
I'll start by writing an update on what's happening with them and what we can expect in the future. Then I'll list all of the credit cards on the market that have balance-transfer deals lasting longer than one year.
A successful prediction
I last wrote my view on What's Going To Happen To Credit Cards? just over a year ago and, lo, it all came to pass. Really, though, it wasn't a difficult prediction when you analyse credit cards frequently; the credit-card market is not as vastly complicated as the stock market or property market.
The next twelve months
Amazingly, considering the financial turmoil, my opinion for the next six to 12 months is the same. It may be harder to get loans, but we will continue to be able to switch our credit-card debts. All the banks still want to lend us money at 14% to 17% APR (a modest average increase since last year), and the easiest way to get away with such huge rates is by posting us credit cards.
However, we'll continue to be offered very long deals on both purchases and balance transfers to sucker us in. The longest deals are now 13 months to 16 months, but I don't expect them to get a great deal longer, excluding rare, exceptional deals (which we will of course keep you informed about).
Credit cards with long balance-transfer deals
When I wrote my last prediction, 14 months ago, there were just five cards offering deals over 12 months. There are now 14. Some of these cards come from the banks that are suffering most from the credit crunch. The good news is, it doesn't matter! Provided you have no savings with the same bank (or, in some cases, the same banking group), it can't possibly affect you.
All credit cards with 0% balance-transfer deals longer than 12 months
Credit card | Length of the deal |
---|---|
16 months | |
Till 01/02/10 (around 15 months) | |
Till 01/01/10 (around 14 months) | |
14 months | |
Tesco | 14 months |
Royal Bank of Scotland | 13 months |
NatWest | 13 months |
Nationwide | 13 months |
13 months | |
13 months | |
Halifax | 13 months |
Citibank | 13 months |
Bank of Scotland | 13 months |
Abbey | 13 months |
All the cards have a balance transfer fee of 3%. Well, a few are actually a tiny fraction below 3%, but there's no point boring you with these pointless 2.9s and 2.99s!
I've not included the typical APR in my table, because you shouldn't ever pay it. Suffice it to say the rates are horrendous, normally at least 14% to 17% APR.
You should pay off your transfer before the deal expires, or switch to another card. If you don't use your card for purchases or cash withdrawals, and you don't use the credit-card cheques that come with it, you'll never pay the APR.
If you're not able to pay off the debt before the deal expires, or you think you won't be able to switch again later, you're most likely better off getting a fixed-rate, unsecured personal loan instead.
If you use these cards correctly, they definitely fall into the `good' category.
I've excluded the LloydsTSB card, even though its deal lasts 14 months. This is because, according to Lloyds' website, you must spend at least £100 on it in the first 3 months. After you've done that you'll be charged interest on your purchase at a hideous rate of APR until you've paid off your entire balance transfer. I think this qualifies as one of those newer small-print tricks I predicted 14 months ago!
> Use our full-search feature and compare all types of credit cards. Plus, with Fool partners you could easily save £500 or more on a £5,000 debt by switching it from your overdraft or existing credit card to a balance-transfer card.
> Read David Kuo's house-prices prediction that is, so far, scarily accurate.
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