Play your cards right and you can avoid paying interest on credit-card debts until July 2008. Here are the best deals, some of the best we've seen in three years.
Although there are roughly 75 million credit cards circulating around the UK, almost a third of over-18s don't have one. In other words, 16 million adults don't have a credit or store card, while the remaining 32 million have an average of 2.4 cards apiece.
Although some people may find it odd that one in three adults prefers not to use our 'flexible friends', I can think of many reasons why this is a sound move. Indeed, I came up with no fewer than fourteen reasons to fear 'magic money' in Seven Reasons To Fear Credit Cards and Seven More Reasons To Fear Credit Cards.
One reason why consumers are wary of credit cards is that they can lead to overspending, partly because many of us see our credit limit as a target. Of course, when we spend more than we can comfortably afford to repay, then we start racking up interest on our plastic debts. My research shows that a typical credit card charges an annual interest rate on purchases of over 16% a year. Therefore, someone with total credit-card debts of, say, £3,000 could be paying in excess of £500 a year in interest.
However, with a half-decent credit history and a little good sense, you can completely avoid paying interest on your card balances. All you have to do is shift your debts to one of more than eighty different credit cards which offer an extended introductory interest-free period on balance transfers. We call these wonderful deals '0% balance transfers' and, if you play your cards right, then you can enjoy a break from paying interest which lasts more than a year.
However, there is usually a price to be paid for this holiday from high interest rates, as all but a handful of 0% deals charge balance-transfer fees. Indeed, you should expect to pay a fee of between 2% and 3% of the value of each transfer in return for this interest-free credit.
Earlier today, I used The Fool's credit card search engine to analyse the latest 0% balance-transfer deals on offer. Here's what I found:
Length of 0% deal | No. of deals |
|---|---|
3 months | 2 |
5 months | 7 |
6 months | 14 |
8 months | 2 |
9 months | 25 |
To 01/02/08 | 6 |
Ten months | 3 |
To 01/03/08 | 1 |
To 01/ or 02/04/08 | 2 |
Twelve months | 18 |
Thirteen months | 1 |
To 01/07/08 | 3 |
TOTAL | 84 |
As you can see, there are lots of deals clustered around six, nine and twelve months. However, if you want to benefit from the very longest 0% deals presently on offer, then pick one of these four table-topping beauties:
Card | Length of 0% deal | Transfer fee (%) | Typical APR (%) |
|---|---|---|---|
Barclaycard Flexi-Rate | To 01/07/08 | 2.90 | 14.9 |
Capital One Platinum | To 01/07/08 | 3.00 | 15.9 |
13 months | 2.98 | 15.9 |
With interest rates generally on the rise, the above long-term 0% deals are some of the best that I've seen in three years. That's why my advice would be not to hang around waiting for something better to come along. You don't know how long the market will support these terrific deals, so don't delay: freeze the interest on your credit cards today!
More: Interest-Free Without A Fee | Your Credit Card May Cost You More