News Column

Saturday Money: Best 0% deal - if you are 'excellent'

July 5, 2014

Rupert Jones



Credit card companies are falling over themselves to offer deals to people with good credit ratings who want to take a breather from paying interest.

This week Lloyds Bank launched what it said was its "longest-ever" credit card balance transfer offer: a 0% interest rate lasting for 32 months. However, that wasn't quite enough to put the bank ahead of Barclaycard, which last month launched a 33-month deal.

Card companies claim many people with existing credit and store card debt could save several hundred pounds by transferring these balances to another provider offering a better rate.

There is no shortage of cards on the market offering 0% interest on these debt switches for a set period. However, to get the best ones, you will typically need to have an "excellent" credit rating and, in some cases, be earning above a minimum amount - perhaps pounds 20,000-plus a year. For example, Barclaycard is targeting people who meet those requirements and also have at least four years experience managing credit cards, loans, overdrafts or a mortgage, and whose debt on credit/store cards is less than 10% of their income.

Transferring a pounds 2,000 debt on a card with an 18.9% APR to the new Lloyds deal, where there is no interest to pay for 32 months, would result in the borrower being better off to the tune of pounds 736 over the period, taking into account the 3.5% balance transfer fee, claims the bank.

The main benefit of a 0% deal is that all of the repayments go towards the outstanding balance, and therefore the debt can be cleared more quickly.

Aside from Barclaycard and Lloyds, other providers with longer-than-average balance transfer offers include Halifax (32 months), MBNA and Sainsbury's Bank (31 months) and Leeds building society and Tesco Bank (30 months). The Leeds card is issued by MBNA.

All of the above charge fees in the form of a percentage of the debt moved over. These vary, though around 3% is fairly typical with the longer offers.

In the case of Barclaycard's 33-month deal, a fee of 3.5% is applied, though it is reduced to 2.99% by a refund. Lloyds Bank's 32-month credit card, which is only available online, has a 3.5% fee on balances transferred within the first 90 days after the account is opened, with a 3% fee applying after that. Cardholders also benefit from 0% interest on purchases for the first six months.

If you intend to clear your balance over a shorter period, there are deals with lower fees. Nationwide is offering a 0% balance transfer period of 15 months where the fee is 0.65% - or 0.55% for those members eligible for the society's Select credit card.

Depending on their credit score, some people applying for cards of this type may be offered a shorter 0% balance transfer period and/or a higher "go to" annual interest rate.

For example, Lloyds says "at least 51%" of customers will be offered 0% for the first 32 months, and its "best" interest rate of 18.9% APR. The remaining up to 49% will either receive 0% for the first 29 months with an APR of 21.9%, or 0% for the first 26 months with an APR of 25.9%.

Captions:

Lloyds Bank has launched its 'longest ever' debt transfer deal, offering 0% interest for 32 months



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Source: Guardian (UK)


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