Longest balance transfer card launched
The Clydesdale/Yorkshire Gold Mastercard also offers 0% on purchases for three months, which then revert to a typical APR of 16.9% thereafter. It comes with a balance transfer fee of 3%.
A couple of years ago consumers had a raft of 0% credit cards to choose from if they wanted to transfer an existing debt, but the market became much quieter in 2009 as the recession took hold.
But now experts say the number of interest-free deals is virtually back to the levels seen in the summer of 2008.
According to Moneynet.co.uk, two years ago there were 80 0% balance transfer cards on the market - of which 39 were for a term of 12 months or more. However, in the midst of the economic downturn one year later, the number of 0% cards plummeted to just 52 with only 24 being for a year or more.
Today there's a choice of 71 deals offering you the chance to switch to a 0% card with 39 of those for 12 months or more.
Moneynet.co.uk spokesperson Andrew Hagger says: “While it's good to see new products being launched and availability back up to 2008 levels, lenders will still be operating very tight credit scoring strategies.
“If your credit record is squeaky clean then the garden looks quite rosy although the size of the credit limit you'll be offered is likely to be much smaller than you'd have seen a couple of years back.
“If your credit rating is tarnished then the experience is likely to be less positive and you may find your application for market-leading introductory offers declined or that you'll be offered plastic but with a higher than standard rate of interest.”
Your credit rating is just one of the things you need to think about if you’re considering switching an existing credit card debt to a new card.
Almost all balance transfer cards come with a balance transfer fee. This is expressed as a percentage of the balance. For example, if a card has a balance transfer fee of 3% you’d pay £30 to transfer a £1,000 debt. It’s important to take this fee into account when working out whether it’s worth switching.
You also need to make a note of when an introductory offer comes to an end and make sure you pay off any outstanding debt before that as otherwise you will be hit by high interest-rate charges.
For example, someone who took out Virgin’s market-leading credit card last January will soon be coming to the end of their 0% period which was 16 months long. The card has a typical APR of 16.9%. If the cardholder had a balance of £2,000, they would see their interest increase by £1,456 over the lifetime of the loan if they just made the minimum repayment of 2.5% of the balance each month.
Kevin Mountford, head of banking at moneysupermarket.com, says: " We would always advise consumers they really need to make some headway in paying off the balance, but for those who have failed to clear their debt in time for the end of their 0% period, they should look to swap their debt to another deal before reverting to the cards' typical APR.”
Apart from Yorkshire/Clydesdale Bank's balance transfer card, other best buys include NatWest, Santander, First Direct and HSBC, which all offer 15-month deals.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.