This credit card beats the longest 0% cards

Find out why this brand new credit card is better than even the longest 0% balance transfer and purchase cards. Move over Virgin and Tesco - we think this new credit card kicks ass!

We all know 0% balance transfer credit cards are a great way of getting to grips with our debts. The 0% introductory period gives you plenty of breathing space to chip away at your balance without racking up more interest.

But, of course, interest-free deals are only ever temporary. If you can’t manage to clear your balance in full by the end of the introductory period, the typical APR will automatically kick in. This means the rate you pay on your card debt could suddenly increase from 0% to a whopping 16% APR or more.

You can side step this massive interest rate by moving your remaining balance onto a new 0% balance transfer card. And you can keep doing so until your debt has completely disappeared. But there’s a pitfall to dealing with your debts in this way: each time you move your balance, you’ll usually have to pay another transfer fee. Most cards charged around 3% which would set you back £145 on a bfalance of £5,000.

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Is there a better way?

Interest-free balance transfer cards may be a useful tool for helping you to pay off your debts sooner rather than later. But is there a better way? Well, how about a lifetime balance transfer card?

If you’re not too familiar, a lifetime balance transfer card charges a low APR until your debt is completely cleared, and some of them don’t even charge transfer fees. So you can take as long as you want to pay off your debt, and your rate will remain low.

You might wonder how on earth this type of card could beat a 0% card, even with a fee-free, low rate deal. But, depending on how you pay your card off, you could make significant savings - and clear your debt more quickly - by going for a lifetime balance transfer card instead.

When 0% cards win

Before we look at that more closely, I’ll start off by saying if you’re confident you can clear your balance within the introductory period, you’ll always be better off with a 0% deal.

This is with the proviso that the amount of interest you would otherwise be charged using a lifetime balance transfer card is more than the balance transfer fee you would pay for a 0% card. But given that most transfer fees are set around 3%, you’d be hard pressed to find a lifetime card with a rate that low.

Recent question on this topic

• Normadgirl asks:

  I have 3 credit cards.2 are at 23.9% int. and 1 which recently offerred balance transfer at 6.9% for the life of the card.

  • 
    MikeGG1 answered "What is the balance on the 3rd card and who are the providers? Mike..."
  • 
    Normadgirl answered "M&S£3466 @..."
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And, if you’re happy to keep on moving your balance about to stay on a 0% rate, you’ll also be quids in even with the extra transfer fees each time you apply. But the danger with this approach is there’s no guarantee you’ll be repeatedly accepted for new interest-free deals, and transfer fees could feasibly become more expensive in the future. Worse still, decent 0% cards may not even be available in years to come.

When lifetime balance transfer cards win

Not everyone is in the enviable position of being able to clear their debt within the interest-free period. Some of you will find there’s still a significant balance left once the 0% rate has gone. But, there's no need to panic about shifting your debt time and time again, because this is where a lifetime balance transfer card can really come into its own.

Let’s use the new Halifax Easy Rate Mastercard as an example, and put it through its paces in a couple of different scenarios. I’ve chosen this card in particular because it offers a competitive lifetime rate of 6.9% and it’s fee-free - so all-in-all, an attractive deal. (Incidentally, the card also offers a rate of 6.9% on purchases.) Remember the rate is variable so there's a risk it could rise at any time. This isn't an issue with 0% cards where the rate is fixed for the length of the introductory period.

But that aside, let’s see how the Halifax Easy Rate Mastercard compares with a standard card charged at a typical APR. There’s no question Halifax will be considerably cheaper than a card with a typical APR of say, 15.9%. But check out how much better off you could be if paid £100 every month until your £5,000 balance was cleared:

Halifax Easy Rate Card versus the standard APR

As you can see, you could save almost £2,000 by choosing the Halifax Easy Rate Mastercard in preference to a standard credit card. You’ll also pay your balance off in 4 years and 11 months, which is 20 months earlier. So there’s no contest here. But how does the Halifax card do compared with the best interest-free balance transfer card instead?

There are now several cards available with 0% balance transfer deals that last for a market-leading 15 months, with balance transfer fees of 2.9% or more. But of course, once the interest-free period is up, the APR immediately jumps to 15.9% or more.

Again I’ve assumed you pay £100 off your card until the £5,000 balance is cleared:

Halifax Easy Rate Card versus the 0% balance transfer cards

Even though the rate on the Halifax Easy Rate Mastercard is much higher than the 0% balance transfer card to begin with, the tables are turned once the standard APR kicks in. In this scenario, choosing the Halifax card saves almost £500, wfhich allows you to pay your balance off five months earlier.

So you can see why it’s important to do the maths. A 0% balance transfer deal might always seem like the best choice, but if you know you won’t clear your balance in full - and you don’t want to continually move your debt or you’re concerned you may rejected for new cards in the future - the Halifax Easy Rate Mastercard is definitely worth considering.

This is especially the case if you're planning to spend on your credit card after transferring a balance to it. Do this on most 0% balance transfer cards, and you'll get caught out by a nasty trick known as negative order of payment. Watch this video to find out how. 

With the Halifax Easy Rate Mastercard, you don't have to worry about negative order of payment because the rate is exactly the same for both purchases and balance transfers. This makes it a much better card to use for both spending and paying off debt.

Compare credit cards at lovemoney.com

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