A 0% balance transfer is a brilliant way of getting to grips with your credit card debt.
This article was originally sent to Fools as part of our 'Summer Lolly' email series.
A 0% balance transfer is a brilliant way of getting to grips with your credit card debt. If you haven’t quite got round to it yet, why not put it at the top of your ‘to do’ list this summer?
Pick one of the best-buys and you won’t need to pay a single penny in interest on your credit card balance until well after summer 2009.
Sounds great, but which of the fantastic 0% balance transfer credit cards should you go for?
Credit card balance transfers have become a fiercely competitive market, with the Capital One Platinum Balance Transfer Mastercard recently storming into the lead. This card now offers the longest interest-free period I’ve ever seen which runs until 1 November 2009.
That means you’ll be able to put a full stop on your interest for almost 16 months.
But don’t forget, balance transfers don’t come for free these days. You’ll need to pay an upfront fee of 3% of your balance for the privilege.
Although this is a great card with a really eye-catching interest-free deal, there’s a downside -- you’ll only be accepted if you have an excellent credit rating. If you don’t, I think you’re probably better off going for a different card which is a little less exclusive.
You could try Virgin Money’s Credit Card instead. This card has been popular for a long time with borrowers because of its competitive 0% deal. In fact, you can enjoy an interest-free period which now lasts for a full 15 months.
Once again, there’s a fee to pay of 2.98%, but I think that’s a reasonably small price to pay to side-step interest for well over a year. And you don’t need a perfect credit history to get accepted either.
In fact, I’m so impressed by Virgin’s card that I recently applied myself. I was accepted instantly online and offered a credit limit generous enough to cover my total credit card debt.
It’s great to know that I won’t run up any interest whatsoever until October next year. That should give me plenty of time to make a serious dent in my balance, if not clear it completely.
What’s more, Capital One and Virgin Money aren’t the only cards to offer lengthy 0% deals. Take a look at the best of the rest below, which are all completely interest-free for more than 12 months:
The best of the rest
You really won’t go far wrong with one of these cards as long as you stick to this golden rule:
The cards I’ve talked about in this article are the best ones to use for interest-free balance transfers only. But not all of them are good for spending. The Capital One Platinum Balance Transfer Mastercard, for instance, offers the longest interest-free period on balance transfers -- until 1 November 2009 -- but it only offers a 0% deal on new purchases until 1 November 2008.
That means, after 1 November 2008, interest will be charged on your spending at a rate of 15.9% APR unless you pay off your balance in full -- and that includes clearing your balance transfer too.
This is because the card operates negative payment hierarchy, which means your repayments will be used to pay off the 0% balance transfer first, leaving your purchases on the card for longer to rack up lots more interest.
If you want to use the same card for spending -- as well as your balance transfer -- always go for a card which offers the same interest-free period on both.
You could try a different card from Capital One, the Capital One Platinum card, which charges 0% on transfers and spending until 1 October 2009 (although you’ll need an excellent credit rating to be accepted). Alternatively, go for Halifax All in One Mastercard which is interest-free on both for the next 10 months.
More: The Credit Card Credit Crunch
Compare credit cards via Fool.co.uk
