Longest ever interest-free balance transfer card launches: but is it worth it?
Virgin Money has today launched the longest ever balance-transfer credit card at 41-months 0% interest.
The longest balance transfer deal prior to today was 0% for 40-months, which is still available from, Halifax, MBNA, Sainsbury’s Bank and Tesco Bank.
However, while Virgin Money’s card beats the length of the 0% deal, its balance transfer fee of 4% mean someone would have to pay £120 to transfer a £3,000 balance. This is £45.90 more than the best 0% 40-month deal from MBNA, which has a 2.47% fee.
If you can repay your balance within two years, there are also cheaper deals available. For example, Halifax currently offers 24-months 0% interest with no balance transfer fee.
As with most 0% interest introductory deals, the interest free period will be cut short if you go over your credit limit, or miss a repayment.
Longest money transfer card
Virgin Money’s new card also pushes the limit for money transfer deals, again offering 41 months at 0% interest, but with a 4% fee - or £150 to clear a £3,000 balance.
Its fee is a little higher than the next best deal - Tesco Bank at 39 months 0% with a 3.94% fee - but there’s an extra two-months to clear the balance, and the difference in fees is just £1.80 on a £3,000 transfer.
Money transfers are like balance transfer deals, but the money gets paid into your bank account so it can be used to pay off debts other than on credit cards, for example a personal loan or overdraft.
Poor for overseas use
On top of a hunky balance transfer fee, the Virgin Card is expensive to use abroad. You’ll be charged a 2.99% transaction fee for any purchases in a foreign currency.
It’s even more expensive for cash withdrawals – you’ll still pay the 2.99% foreign currency transaction fee, plus a 5% cash-handling fee (min. £5). This means you’ll pay around £1 in fees for every £12 you withdraw. On top of that, you’ll start paying interest on cash withdrawals immediately.
If you’re planning a trip abroad, it’s far better to pick a specialist overseas credit card. MBNA’s Everyday Plus Card, for example, charges no fees for cash withdrawals or foreign transactions – although you’ll still pay interest on cash withdrawals - and it’s rate is 7.4% APR. The Halifax Clarity Card has the same fee structure, but at a higher 18.9% APR.
If the only thing that matters to you is finding the longest 0% interest balance transfer deal, this is the card for you. But if you’re more concerned about the overall cost (and you should be), most people will be better off going for a cheaper 40-month deal, or fee-free 24 month deal.
The exception is for money transfers – the fees are only slightly higher than for the next-longest deal, so if you need a long time to clear a balance it might be worth it. However, if you don’t need three or more years to clear a debt, opting for a shorter 0% period with a lower fee will cost less overall.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
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%.