Lloyds TSB has slashed its transfer fee to just 1.5%, which makes it the new best buy.
If you're struggling under the weight of credit card debts, then your interest bill is probably getting you down.
That's because borrowing on credit cards is horribly expensive. Despite the Bank of England's base rate being stuck at a record low of 0.5% a year since March 2009, the interest rates charged by credit cards have actually being rising.
Credit cards: a costly way to borrow
So far this year, leading card issuers such as Barclaycard, Bank of Scotland, Halifax, NatWest, Royal Bank of Scotland and Santander have put their rates up, some by as much as 2% APR. (APR stands for Annual Percentage Rate, which is the official way of comparing interest rates. For example, if you have a level balance of £1,500 for one year on a credit card charging 19.1% APR, then your interest bill will be £286.50).
As a result, the average interest rate charged on purchases made using credit cards is now 19.1% APR, which is the highest level since 1998. With an interest rate this high, your debt will double every four years, thanks to interest alone.
Play the transfer market
The simplest way to 'stop the clock' on high rates of interest is to act like a Premier League football manager and play the transfer market.
With 0% balance transfer cards, you can shift your existing balances (debts) from one credit card to another charging no interest for an extended period. Although there is a transfer fee to pay, switching to a 0% balance transfer card can freeze the interest on your plastic debts for up to 22 months.
[SPOTLIGHT]The good news for hard-pressed borrowers is that 0% balance transfer cards keep getting better this year, as card issuers compete to win new customers. The longest 0% deal has steadily risen from 18 months to 20 months to 22 months (at one point it was as high as 24 months!).
Thus, the best 0% deals now offer almost two years of interest-free credit on transferred balances. However, these best buy 0% transfers charge a fee of around 3% of the sum shifted. On a balance of, say, £1,500, this comes to £45.
Lloyds slashes its transfer fee
Rather than lengthen its 0% transfer period, Lloyds TSB has become more competitive by halving its transfer fee. From Monday, 5 September, Lloyds TSB has halved its transfer fee for the Lloyds TSB Platinum Credit Card to 1.5% from 3% for balances of £1,500 or more.
Hence, a balance of £1,500 will now attract a fee of £45, minus a refund of £22.50, which is £22.50. Spread over 15 months, this fee is a tiny £1.50 a month.
In effect, Lloyds TSB's halved fee amounts to 0.1% a month, which is an incredibly cheap way to borrow. But how does it compare to other best buys for 0% transfers?
Best buy 0% balance transfers
Can anyone beat Lloyds TSB's 15-month deal for a fee of 1.5%? Here are four best buys among 0% balance transfers lasting 15 months or more:
|
Card/issuer |
0% length |
0% fee |
Purchase rate |
Notes |
|
22 months |
3.5% Min: £3 |
17.9% APR |
Transfers cannot exceed £3,000 or your credit limit; 0% on purchases for three months |
|
|
22 months |
2.9% Min £7.25 |
17.5% APR |
0% on purchases for three months |
|
|
19 months |
2.85% Min £3 |
16.8% APR |
|
|
|
18 months |
2.8% Min £5 |
16.6% APR |
|
As you can see, these four top transfers offer interest-free credit on transfers for between 17 and 22 months, but charge fees ranging from 2.8% from NatWest to 3.5% from Halifax. The best way to compare these fees is to look at the 'effective monthly fee', which I've done below:
Lloyds TSB's low rate wins
|
Card/issuer |
Fee per month |
|
0.100% |
|
|
0.132% |
|
|
0.150% |
|
|
0.156% |
|
|
0.159% |
The monthly fees for these four other 0% deals range from 0.132% from Barclaycard to 0.159% at Halifax. Therefore, on a like-for-like basis, the Lloyds TSB Platinum Credit Card now offers the cheapest 0% balance transfers in the UK.
Pay no interest at all
If you have a balance of £1,500 or more and want to repay it without paying any interest, here's what you'll need to pay each month to clear your balance over 15 months using the Lloyds TSB Platinum Credit Card:
|
Balance transferred |
Transfer Fee (1.5%) |
Total |
Monthly repayment (for 15 months) |
|
£1,500 |
£22.50 |
£1,522.50 |
£101.50 |
|
£2,000 |
£30.00 |
£2,030.00 |
£135.33 |
|
£3,000 |
£45.00 |
£3,045.00 |
£203.00 |
|
£4,000 |
£60.00 |
£4,060.00 |
£270.67 |
|
£5,000 |
£75.00 |
£5,075.00 |
£338.33 |
This table shows the huge savings to be made by transferring existing balances to 0% credit cards. Why pay, say, nearly £400 a year on a £2,000 debt when you can pay a fee of £30 to avoid interest for 15 months? As our US cousins say, it's a complete no-brainer...
Three final transfer tips
Before you rush off to play the 0% transfer market, heed these words of warning:
- Check to see if there is a minimum income level before applying for a new card. Some issuers will insist that you earn at least, say, £20,000 a year.
- Don't take 0% transfer cards shopping with you. Use them for balance transfers and nothing else, as the rates of interest on purchases are pretty steep.
- Set up a direct debit or standing order for your monthly repayments. This helps you to budget, to repay off your balance within the 0% timeframe, and to avoid penalty charges (and even the possible withdrawal of your 0% deal).
Now what are you waiting for? Switch and save today!
More: Find cracking credit cards | The top low-rate credit card | Beat BT's latest price rises