We have great news for hard-pressed borrowers, thanks to a terrific new card which offers interest-free credit until the next decade.
This article was first sent to Fools as part of our 'The Good, The Bad and The Ugly' email series.
Way back on Christmas Day 2000, online bank Egg started a minor revolution by launching the UK's first 0% balance transfer. This allowed Egg cardholders to shift debts from other credit cards to their Egg Card and enjoy six months of interest-free credit on these transferred balances.
This interest-free offer proved to be a huge success. Today, crafty card sharps can choose from over a hundred different 0% balance-transfer offers, potentially saving hundreds or even thousands of pounds a year.
How to shuffle your deck
When choosing a 0% balance transfer, there are three things you need to know:
1. How long the 0% period lasts -- the longer, the better. Most deals last between six and twelve months, but the most generous plastic offers interest-free credit lasting a year or more.
2. How much will the transfer fee be? Only three credit cards don't charge an upfront fee for balance transfers: Abbey Zero and Ulster Bank (both 0% for six months) and Northern Bank (five months). All other credit cards charge transfer fees, typically between 2% and 3% of the value of each transfer.
3. Never go shopping with a 0% transfer card. Although some credit cards offer 0% on both balance transfers and new spending, the 0% on spending period is normally shorter. Thus, once this interest-free period is over, you start paying interest on these purchases at your standard rate until your entire debt is repaid. Avoid making this expensive mistake at all costs!
Checking the Best Buy tables, I see that one card stands head and shoulders above the rest. The Capital One Bank Platinum BT & Purchase MasterCard offers 0% on balance transfers until 1 January 2010, which is sixteen months away. The transfer fee is 3% (minimum £1.50), which comes to £75 for a transfer of £2,500. That's a small price to pay for freezing your interest until the next decade.
In addition, the above Capital One card gives you 0% on new spending until 1 January 2009, followed by a typical rate of 15.9% APR. As the 0% on spending expires a year before the 0% transfer, you should avoid making purchases if you aim to transfer balances to this card.
The minimum monthly repayment for this card is 3% of your balance (minimum £5). To apply for this card, you need to be earning at least £10,000 a year and, if your application is successful, your credit limit will be between £500 and £16,000.
Frankly, this is a terrific deal for anyone paying interest on existing credit and store cards. Indeed, I'd apply for this card myself if I weren't already an existing Capital One card holder...