This Year's Best Credit Card

Get the lowdown on Laura Starkey's favourite credit card.

This article was first sent to Fools as an email in our 'The Good, The Bad and The Ugly' series.

After weeks of economic turmoil -- and seemingly endless wrangling about which baddie is to blame for it -- you could be forgiven for focusing more on the world's financial problems than your own.

However, if you've got debts burning a hole in your budget, now's the perfect time to give them some attention. Despite the general doom and gloom, there's a new 0% credit card on the market -- and it offers the best balance transfer deal I've seen in a long time.

A vested interest

As a recent graduate and ex-shopping obsessive, I have a vested interest in keeping an eye on the balance transfer market. What's more, having taken advantage of some brilliant offers over the past year or so, I know how fantastic it feels to ditch the interest on a debt.

I'm now coming towards the end of a promotional 0% period, but still need more time to completely clear my credit card balance. So, lately, I've been in search of a nifty new card.

Luckily, I've found one that offers the longest 0% deal for balance transfers I've seen this year. What's more, it comes with several extra special features, which take it above and beyond the quality of most balance transfer deals.

Better than the rest

If I were giving out a prize for `Credit Card Of The Year', the Virgin Money Credit Card MasterCard would win it.

Here are three good reasons why.

1. It's the longest 0% deal on the market.

The Virgin Money Credit Card MasterCard currently offers the longest 0% balance transfer deal available.  If you shift existing debts to this card, you'll pay no interest on them for a whopping 16 months!

This is brilliant news for anyone who knows they'll need a sizeable stretch of time to demolish their debt.

It means, for example, that if you received your new Virgin Money card on 1 November 2008 and transferred a balance that day, it would remain interest free all the way up until 1 March 2010.

2. It offers 0% on new purchases for six months -- with no nasty catches!

Like many 0% balance transfer cards, the Virgin Money card offers an additional deal: for six months, you'll pay no interest on any purchases you make on your card.

However, unlike most credit cards, the Virgin Money card won't hit you with negative payment hierarchy if you take advantage of this offer. That's because Virgin temporarily allocates payments to its 0% credit card in a different way from other lenders.

While your balance transfer and purchases debts attract the same rate of interest (i.e., for the first six months you have the card), any money you pay off your Virgin card will be put towards reducing your purchases debt first, rather than your balance transfer debt.

This means that if you put new purchases on your Virgin card and pay them off within six months, you will avoid interest completely. I think that's great news with Christmas just around the corner.

However, it is worth remembering that it's vital to pay back any 0% purchases debt in full before the six month promotional period expires.

As soon as it's over, any outstanding purchases debt on your Virgin Money card will be charged at the lender's standard interest rate (16.6%), and will become subject to negative payment hierarchy.

3. You can transfer old overdraft and loan debts to this card.

Credit cards that allow `money transfers' as part of 0% promotions are few and far between -- but, once again, the Virgin Money MasterCard comes up trumps here.

As long as you're offered a high enough credit limit, you'll be able to shift outstanding overdrafts and even personal loan balances to this credit card.

Therefore, when it comes to sorting out your finances, I reckon the Virgin Money card offers a rare opportunity to deal with several different debts all at once: another bonus of this brilliant balance transfer deal.

Are there any drawbacks?

No financial product is perfect -- and, as always, there are one or two things you should be aware of before applying for this card.

Firstly, like most other balance transfer cards, the Virgin Money MasterCard charges a balance transfer handling fee of 2.98%. In practice, this means it would cost you £149 to shift a balance of £5,000 to this credit card.

However, I think this fee is well worth paying for a 16 month interest break.

It's also important to note that the Virgin Money Credit Card MasterCard is issued by MBNA group. This means that, if you have an existing MBNA credit card, it's unlikely you'll be accepted for the Virgin Money Credit Card -- and even if you were, you'd be unable to transfer balances onto it from other cards operated by MBNA.

Finally, don't forget that no one is guaranteed to get any credit card. If you're concerned your credit rating might not be strong enough for a 0% deal, it's worth checking this before you apply.

Demolish those debts

Overall, I think the Virgin Money Credit Card MasterCard is a worthy choice for anyone who's looking to beat down their debts.

Good luck with yours!

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