Borrowers: Your worst nightmare just came true

Calling all rate tarts and credit card borrowers - if you want a new 0% card, you'd better hurry because we have some very, VERY bad news...

When I needed to sort out a balance transfer card at the end of last year, I was pretty spoilt for choice. There were loads of cards to choose from offering the best part of a year and a half, completely free from interest.

However, the period of 0% interest that you can expect from balance transfer credit cards is undergoing a seismic shift at the moment – and not in a good way!

The shrinking 0% period

For the last couple of years, the best balance transfer card was offered by Virgin, which used to give you a whopping 16 months of 0% interest on balance transfers. We harped on about this deal a lot here at lovemoney.com, because it was the best interest-free credit card deal we had ever seen. After all, by spreading your payments for 16 months, interest-free, you could save a significant chunk of money.

However, last month Virgin surprised the market by cutting that 0% period by two months. It now offers just 14 months interest-free credit, meaning it is no longer the market-leader as a multitude of providers were offering 15 months at 0%.

The domino effect

However, one of the top credit cards offering 15 months interest free on balance transfers has now followed suit. Barclaycard has cut the period on its own Platinum card down from 15 months to just over 13 months (the deal ends in June 2011).

While there are other credit cards offering 15 months at 0% interest, the Barclaycard Platinum card was the market-leader. It had the lowest transfer fee and was available to everyone, not just existing customers.

Bad news for borrowers

So in the space of two months, the two best deals in the 0% balance transfer card have cut their 0% periods down by two months.

And unfortunately, we think this worrying trend is likely to continue, for one simple reason. Credit card providers are panicking. The Government is about to bring in legislation banning them from carrying out one of their nastiest tricks: negative order of payment, and this will cost them millions.

Negative order of payment is particularly relevant to 0% balance transfer cards because it occurs when your cheapest debts (the balance you transferred) are paid first and your most expensive debts (your new purchases, which are typically interest-bearing after the first few months) are paid last. So you rack up interest on your new debts, while you're desperately trying to clear your old ones.

While regular readers of lovemoney.com are well aware of this trap, most people fall headfirst into it and ending up shelling out hundreds of pounds in interest on a supposedly interest-free card.

So it's good riddance to this nasty trick for most of us, but for the savvy rate tarts among you, the new legislation (which will come into play by January at the latest) it's actually bad news. Because credit card companies will no longer be able to make as much money from 0% deals as they used to - and that's why they are cutting back their 0% periods on balance transfers.

So if you are currently sitting on a pile of debt that you are paying interest on, or perhaps you only have a month or so left of an interest-free period, now is definitely the time to sort out a new balance transfer card, if you want to give yourself as long as possible in which to pay off that debt without getting whacked with interest.

But which is the best card to apply for now that Barclaycard and Virgin are no longer in the picture?

The existing customer cards

As I mentioned earlier, a number of the best balance transfer cards in the market today are only available to borrowers who already bank with that provider. All of the cards detailed below offer 15 months of 0% interest, but unless you have a current account with the bank, then you won’t be able to get hold of them.

The best for the rest of us

So if you don’t bank with any of those providers, don’t panic, there is still one cracking balance transfer card to choose from - although probably not for long.

If you're not an existing customer of the banks outlined above, the Santander Credit Card should be your number one port of call. Like the cards in my table, it offers 15 months free of interest on any balance transfers. However, you will pay a slightly higher fee (3% on any balance you choose to transfer onto the card, as opposed to 2.9%).

Fail to get the Santander card, and you won't be able to get 15 months of interest-free credit.

Your next best option at this point is to apply for the Virgin credit card, which offers 14 months at 0% interest, with a fee of 2.98% on any sum you transfer onto the card. Bear in mind however that the card is operated by MBNA, which means you won’t be able to transfer debt from a fellow MBNA card onto the Virgin card. Unusually, you will, however, be able to transfer money from your credit card into your bank account for a 4% fee, so could potentially shift an expensive overdraft onto this card and pay it off interest-free over the next 14 months.

Another brilliant option is the Egg Visa card, offering 0% interest on balance transfers until 1st June 2011. You’ll have to pay a 3% fee on any sums you move over, while it’s worth noting this card is only available to new Egg customers.

Finally, there’s still the Barclaycard Platinum, which now offers 0% interest on balance transfers until June next year, with a 2.9% fee.

• Watch this video: Don’t get caught out by negative order of payment

The lifetime option

Of course if you have a sizeable chunk of debt that you need to pay off, 15 months might not be long enough.

Related goal

Pay off credit card debts

How to destroy your credit card debt quickly and effectively.

Do this goal

In which case, you might prefer to go for a lifetime balance transfer card – a card which offers a low rate of interest for the entire life of the card, helping you to at least keep interest to a minimum. What’s more, you save having to fork out on a balance transfer fee too!

There’s a new front runner in this area. Up until recently the Barclaycard Simplicity has been the market-leader, offering the low rate of 7.8%.

However, it has been trumped by the marvellous Halifax Easy Rate Mastercard, a terrific bit of plastic that offers a rate of 6.9% for the lifetime of the card on both balance transfers and purchases. It’s brilliant, and well worth considering if your debt is on the large side.

• Adopt this goal: Pay off credit card debts

More: The UK's nastiest credit card tricks! | Get £339 for using your credit card