Are these 0% credit cards a waste of time?
Some 0% balance transfer credit cards allow you to avoid interest and fees, but not for long.
Recently there has been an increase in the number of 0% balance transfer credit cards with extremely low balance transfer fees or even no fee at all. But are these cards of any use to anyone?
The balance transfer fee is what you pay for the privilege of transferring your debt to a card that doesn’t charge interest for a period. It’s a percentage of the debt you’re moving, so if you have £2,000-worth of debt and the balance transfer fee is 1.5% you’ll pay £30.
So these cards are an extremely cheap way to pay off your debts, in theory. However, the cheapest cards are offering tiny 0% periods.
Free, but at what cost?
The most extreme example is the Tesco Clubcard Low APR credit card, which doesn’t charge a balance transfer fee but only offers a three-month 0% period. To be fair, this card is really designed for people who want to pay off their card over a long period, as it has a low representative APR of 7.8%, compared to the average APR of around 17-18%.
However, the Barclaycard Platinum six-month card also doesn’t charge a balance transfer fee but you’ll have to pay off your debt within half a year or you’ll risk paying interest.
And the new Lloyds Bank Platinum , Bank of Scotland Platinum and Halifax All in One 10-month cards have the lowest fee out there, at just 0.4% (or just £8 on £2,000 debt), but you have less than a year to pay off your debt.
Any of these might be fine if you only have a small amount of debt to pay off, but if you have a decent amount you need to stop and think.
Do your sums
When you’re looking for a 0% balance transfer card you’re almost certainly looking for a cheap way to pay off some debt. However, it’s important to be realistic about how long you’ll need. The whole point of opting for one of these cards is to wipe your debt slate clean, so there’s no point in going for a shorter 0% period to save some money on the fee only to run out of time.
Before you choose your card, you should work out how much you can realistically afford to repay each month and let that be your guide.
Having said all that, you can now enjoy up to 28 months free from interest for just a 1.5% fee, and you can go right up to 33 months. Here are the cards with the longest 0% period for each size of fee.
|
Credit card |
0% period |
Balance transfer fee |
Fee paid on £2,000 transfer |
Representative APR after 0% period ends |
|---|---|---|---|---|
|
Six months |
None |
£0 |
19.9% |
|
|
10 months |
0.4% |
£8 |
18.9% |
|
| Bank of Scotland Platinum | 10 months | 0.4% | £8 | 18.9% |
|
10 months |
0.4% |
£8 |
18.9% |
|
|
12 months |
0.5% |
£10 |
18.9% |
|
|
12 months |
0.5% |
£10 |
18.9% |
|
|
15 months |
0.55% |
£11 |
15.9% |
|
|
15 months |
0.65% |
£13 |
17.9% |
|
|
17 months |
0.9% |
£18 |
18.9% |
|
|
Halifax 28-Month Low Balance Transfer Fee MasterCard |
28 months |
1.5% |
£30 |
18.9% |
|
Bank of Scotland Platinum 28-Month Low Balance Transfer Fee MasterCard |
28 months |
1.5% |
£30 |
18.9% |
|
Lloyds Bank Platinum 28-Month Low Balance Transfer Fee MasterCard |
28 months |
1.5% |
£30 |
18.9% |
|
30 months |
2.5% |
£50 |
18.9% |
|
|
32 months |
2.7% |
£54 |
18.9% |
|
|
33 months |
2.99% |
£59.80 |
18.9% |
*Nationwide current account customers only
As you can see, you can get a decent 0% period for a relatively small fee.
Once you have picked your 0% card, do try to pay it off in full by the end of the 0% period. You must make sure you at least make the minimum repayment each month, or you’ll lose your 0% benefit and get a black mark on your credit report.
More on borrowing:
The best 0% balance transfer credit cards
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