Balance transfer war heats up as Tesco Bank launches fee-free 24-month deal
As with the Halifax deal, the new Tesco ‘No Balance Transfer Card’ charges no interest on debts transferred from other cards for up to two years, and there’s no balance transfer fee either.
However, people looking to shift a credit card debt might find the Tesco Bank deal the more attractive of the two, as all successful applicants will receive the full two-year interest free period.
Halifax will only offer the full 24-month 0% period to 51% of people who qualify for the card. Other successful applicants will only get a 13-month interest-free period.
Alastair Douglas, chief executive of TotallyMoney.com says:“Tesco shoppers carrying a balance on their current credit cards will benefit the most from this card. The no fee balance transfer offer will let them transfer their current balance for no cost and they won’t have to pay interest for 24 months. They’ll also have the added bonus of earning Clubcard points whenever they spend.”
He adds that he doesn't expect a big shift in the market following the new Tesco and Halifax deals, though the growing competition will benefit consumers.
The Tesco No Balance Transfer Card charges 18.9% APR once the 0% period is up, but while “most” successful applicants will receive this rate, some borrowers will be charged 20.9% APR or 23.9% APR, subject to their credit history.
Halifax’s two-year fee-free balance transfer card also charges 18.9% representative APR, though borrowers that don’t qualify for the advertised rate will also be charged higher interest rates, at 21.9% or 25.9% APR.
While this is the strongest deal, if you can repay your card debt over two years, anyone looking to pay down a larger credit card debt might want to consider a longer interest-free period. Several lenders offer interest-free balance transfers for up to 40 months.
Cheap credit card and mortgage deals fly onto the market
A spate of cheaper credit card and mortgage deals have arrived on the market this week, following measures announced by the Bank of England on Monday that will make it easier for banks to lend another £150 billion to consumers and small businesses.
For example, as well as the two new balance transfer cards above, HSBC today announced a record-low 10-year fixed rate mortgage deal at 2.79%, while Coventry Building Society plans to launch an even cheaper 10-year fix tomorrow.
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.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
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%.
A standard by which something is measured, usually the performance of investment funds against a specified index, such as the FTSE All-Share. Active fund managers look to outperform their benchmark index. Cautious fund managers aim to hold roughly the same proportion of each constituent as the benchmark, while a manager who deviates away from investing in the benchmark index’s constituents has a better chance of outperforming (or underperforming) the index.