Credit cards that offer the same 0% period on balance transfers and purchases are now harder to find, and yet they are vital if you want to do both without getting stung. Read more, and see the best cards.
The market for credit cards is certainly a competitive one, so you'd think card companies would be doing everything they can to win your business. It may seem surprising then that cards which charge 0% interest on balance transfers and purchases over the same period are something of a rarity.
Of all the 0% balance-transfer cards which can be found in The Fool's independent credit card search, less than 40% offer interest-free periods on purchases that measure up.
In my previous article, Are 0% Balance Transfers Still Going Strong? I explained that the interest-free balance-transfer period on some cards has been extended at the apparent sacrifice of equally attractive 0% deals on purchases. But you can still find some cards where the interest-free period runs for the same number of months on both.
These are a sensible choice if you're planning to spend on your new card as well as transfer your balance from an old one. This means you won't inadvertently pay more interest than you should because 'negative payment hierarchy' doesn't apply to this type of card.
You may well have come across that term before, but here's a quick recap: essentially it refers to the order in which different debts on your card are repaid.
You could be forgiven for assuming that, if you have a credit card which charges 0% on your balance transfer and, say, 15.9% on your purchases, your monthly repayment would be used to chip away at the most expensive debt first. But the vast majority of credit cards don't. And when I say 'vast' I mean all but one (Nationwide's)!
The rest use this costly little trick so your monthly repayments are actually used to pay off the cheapest debt -- your 0% balance transfer -- first. This means the more expensive debt, the purchases one, stays on your card longer, costing you more interest while earning fat profits for the credit-card company into the bargain.
Hardly fair, I think you'll agree. If you'd like to read more about this take a look at Be Careful With Your Credit Card.
So to avoid nasty negative payment hierarchy, here are the six best cards around at the moment for both balance transfers and purchases:
Best Six Cards for 0% Balance Transfers and Purchases
Credit card | 0% deal on both | Balance | Typical |
|---|---|---|---|
Bank of Scotland One 12 Month Offer | 12 months | 3% | 15.9% |
12 months | 3% | 15.9% | |
10 months* | 2.5% | 14.9% | |
| Virgin Money Credit Card | 9 months | 2.98% | 15.9% |
9 months | 3% | 15.9% | |
SkyCard MasterCard | Until 1 June 2008 | 2.99% | 16.9% |
*With the balance transfer you get 0% on up to £5,000 only
The interest-free periods are not quite as attractive as you would find among the best cards for balance transfers only, and the fees also tend to be a smidge higher, but you won't be caught out by negative payment hierarchy as both sources of debt are dealt with in exactly the same way.
The most competitive cards will still allow you to avoid paying interest on transferred balances and spending for a whole year, which can't be bad. But don't forget once the year has passed the higher APRs will take hold, which for the best cards will typically cost you 14% to 16% in interest each year.
> Pay No Interest For A Year | We Should Spend More On Our Credit Cards
> Don't forget that you can use The Fool to compare credit cards of every kind.