Find a 0% balance transfer credit card

Published by Rebecca Atkinson on 29 December 2008.
Last updated on 09 March 2009

Pile of credit cards

The credit crunch and its devastating impact on banks’ appetite for lending, provoking concerns that 0% credit cards could be a thing of the past.

Just as mortgage lenders are pickier about the homebuyers they will lend to, so are credit card providers cherry-picking customers with the cleanest credit records for 0% balance transfer and purchase deals.

However, for anyone racking up debt on existing balances on high interest credit cards, it is still well worth checking to see if you could save money by moving to a 0% deal. Just make sure you are confident that you will be eligible by checking your credit record and making sure all the information companies see about you is correct and up-to-date.

When you apply for a credit card the provider will check your record – however, by doing this it will leave what is known as a footprint on your record. Too many footprints can have a negative impact on your credit score, and might damage your chances of being approved for a mortgage, loan or credit card down the line.

Whatever you do, don’t keep applying for credit cards if you are turned down by one provider; multiple applications for credit within a short space of time could have a negative impact on your credit record and might be held against you in the future. For more information about checking your credit record, click here.

Three 0% deal catches to watch out for

There are a few things to take into consideration when opting for a balance transfer card. Firstly, be aware that you will have to pay a fee to transfer money from an existing credit card. This is normally around the 3% mark, but some providers have a minimum amount – for example, Barclaycard’s OnePulse 0% balance transfer deal has a fee of 2.9%, but this must be at least £7.25.

Secondly, not all 0% balance transfer credit cards are interest-free for purchases as well. If you do intend to use your plastic for further shopping, then make sure you opt for a card that offers 0% on balance transfers and purchases. The time periods of these two 0% deals might differ, so make sure you don’t keep spending on your card once the 0% offer has expired.

Thirdly, watch out for negative payment hierarchy. This means your payments will be used to pay off the balances attracting the lowest interest rate first. Therefore, if your 0% purchase deal has expired but you still aren’t attracting any interest on your balance transfer, then your payments will be used to pay off the transferred balance rather than new spending.

The crux of this is that you will end up paying more in interest, as your purchase debt (possibly attracting interest of around 18% APR) will not reduce until the balance transfer is paid off.

The top 0% balance transfer deals tend to all have negative payment hierarchy, so it might be worth having two credit cards, one for balance transfers and one for new purchases.

Remember, if you do go for a 0% balance transfer deal then work out exactly what you need to pay each month, so you completely clear the debt before interest kicks in. While this may sound obvious, it is all too easy to become apathetic about credit card debt until it is too late.

To reduce the risk of being stuck with a balance to clear at the end of the 0% period, it is worth setting up a standing order and taking the payment into account as part of your monthly budget.

 
 
Top 0% balance transfer credit cards
 
Abbey
 
* Good if you want a long period to pay off the balance
* Good if you also want to make new purchases interest-free
* Bad if you want to avoid negative payment hierarchy
 
Abbey has just launched a new credit card deal with one of the longest interest-free balance transfer periods on the high street. Balance transfers will not attract any interest for 15 months, while purchases are interest-free for three months.
 
Balance transfers are subject to a 3% fee of at least £5. Cash advances will attract interest of 27.9% APR.
 
After the interest-free period ends, you will be charged an APR of 15.9%. However, you will receive 56 days' interest-free for purchases if you pay your balance in full and on time.
 
Virgin Money’s MasterCard
 
* Good if you want a long period to pay off the balance
* Good if you want to make new purchases without attracting interest
* Good if you want incentives
* Bad if you want to avoid negative payment hierarchy

Virgin Money’s MasterCard offers 0% interest on balance transfers for the first 15 months from the date of issue, as long as these are made within the first 60 days. Although there is no annual fee, a balance transfer fee of 2.98% (minimum £3) applies.

The card also offers 0% on all new purchases for the first six months from the date of issue. After this time, you will get 50 days to pay off your balance before an of APR 16.6% applies.

Virgin offers customers other incentives with this card, such as discounts on Virgin products and services. These include money off Virgin trains, holidays, mobiles and wine.

However, bear in mind that Virgin applies negative payment hierarchy. This means that once the 0% period on purchases has expired, your payments will be used to pay off the balances transfer debt first.

Egg

* Good if you want a longer period to pay off your balance
* Good if you also want to make purchases
* Good if you want to transfer balances down the line
* Good if you want insurance incentives
* Bad if you want to avoid negative payment hierarchy

Egg's VISA credit card offers 0% on balance transfers until 1 May 2010 (currently just under 15 months), subject to a 3% fee. It also offers 0% interest on new purchases until 1 June 2009 (currently just under four months).

If you stick with this card beyond the interest-free period, you'll also receive two 0% anniversary offers - the first in March 2011 and the second in March 2012. Balance transfers made during these months will not attract any interest for five months.

This card comes with free purchase transit protection for items costing more than £25 (up to £1,000 per item) and free travel accident insurance.

After the interest-free period, outstanding balances will attract an APR of 16.9%. You will, however, get 45 days to pay off your balance before this interest kicks in.

Barclaycard OnePulse

* Good if you live in London
* Good if you want a lower APR once your 0% balance transfer period has ended
* Good if you want to make payments without entering your PIN
* Bad if you want to make new purchases
* Bad if you want to avoid negative payment hierarchy

Barclaycard OnePulse offers 0% on balance transfers for 14 months, after which time its APR becomes 14.9%. The balance transfer is 2.9% (minimum £7.25).

Another benefit of this card is that customers can use it to travel around London as it includes a built-in Oyster card. Plus, OnePulse offers a cashless feature meaning you can pay for items under £10 without having to put in your PIN number.

Barclaycard also offers its OnePulse card as a six-month 0% purchase deal or as a cashback card, with 5% returned to you on Transport for London spend.

If you opt for the 0% balance transfer deal, then bear in mind purchases will attract interest of 14.9% APR although you do get 56 days to pay off new balances before interest kicks in.

If you do make purchases and don’t pay off these off within 56 days, then Barclaycard will apply negative payment hierarchy and will allocate payments to meet your 0% balance transfer debt first.

You should also be very careful about using this card for cash withdrawals; apart from the fact that this type of transaction will attract interest of 27.9% APR, your payments will be used to meet your balance transfer debt and your purchase balance before your cash withdrawal balance is touched, so you could end up racking up a lot of interest very quickly.

HSBC MasterCard

* Good if you want to make new purchases
* Bad if you don’t have an HSBC account
* Bad if you want to avoid negative payment hierarchy

HSBC offers 0% for 15 months on balance transfers as long as these are made within 30 days after you take out a card. A 2.9% balance transfer fee applies, minimum £5.

This card also offers 0% of purchases for the first three months after which time a 16.9% APR variable kicks in. You do, however, have 56 days in which to meet your new purchase balance before interest applies.

This card is only available for new HSBC credit card customers who already have an account with the bank, excluding student current accounts.

As with most top 0% credit cards, HSBC uses negative payment hierarchy, therefore your payments will be used to meet your balance transfer first, then purchases and lastly cash advances.

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