Pay Off Debts At 3.9% A Year

If you're paying interest on credit and store cards, here's a simple way to cut your annual interest rate to under 4%.

Borrowing money on credit cards is terribly expensive. Indeed, my own research into over three hundred different cards found that the average interest rate charged on purchases now exceeds 16% a year. Even worse, the rates charged for cash withdrawals can exceed 25% a year. Ouch.However, not everyone seems to have got this simple message, as 76% of the £55 billion we owe on credit cards is interest-bearing debt. In other words, as a nation, we're paying interest on just over three-quarters of our credit-card balances. Ouch again.The simple way to stop the clock on your interest bill is to transfer your existing credit- and store-card balances to one of the dozens of credit cards which don't charge interest on balance transfers for an extended introductory period. These wonderful 0% credit cards offer interest-free credit lasting from five to thirteen month on transfers. Eureka!However, there are a few catches to the 0% card game. First, if you want a balance transfer which lasts for more than six months, then you'll have to pay a transfer fee, usually 2% to 3% of the value of each transfer. Second, if you want to keep being a 0% 'rate tart', then you'll need to find a new card to switch to every six to twelve months.On the other hand, if you feel that life's too short to spend your time juggling your credit-card balances, then you may find lifetime balance transfers to be more convenient. Quite simply, by transferring your plastic debts to these cards, you enjoy an ultra-low interest rate until your balance is completely paid off. So, with a lifetime balance-transfer, you can sit back and enjoy a mega-cheap rate for year after year after year.I know of nine credit cards which currently offer low lifetime rates on balance transfers. Here are my five picks of this bunch:Best Buy lifetime balance-transfer cardsCredit cardTransfer rateand periodTransfer feeTypical APRfor purchasesMorgan StanleyPlatinum Credit Card3.9% a year until 01/07/101% (minimum £3, maximum £5015.9%Marks & Spencer Money&MORE MasterCard4.9% a year for lifeNone17.9%Citi PlatinumMasterCard4.9% a year for life2.5%(maximum £75)16.9%BarclaycardPlatinum Credit Card5.9% a year for lifeNone14.9%Sainsbury's BankPlatinum Credit Card5.94% a year for lifeNone15.9%Source: The Motley Fool's credit-card search engine.Note that, strictly speaking, the Morgan Stanley deal isn't a lifetime rate, because it only lasts for 38 months or so. Nevertheless, if you plan to take three years or less to repay your balances (and I sincerely hope that you will do just that), then this is the cheapest offer currently available.Finally, it's vital to remember the Golden Rule of lifetime balance-transfer credit cards: never, ever take them shopping. Otherwise, any purchases will attract interest at the APRs shown above, which defeats the point of shifting your debts in the first place!More: When Balance Transfers Backfire!