Are you paying painfully high interest on your overdraft? A top money transfer credit card could cut your interest rate to zero.
Overdrafts on current accounts can be painfully expensive.
One way to get out of the red is to use a 0% money transfer credit card.
These work by letting you transfer money from your credit card to your current account. Once you’ve transferred the money, you can use it to pay off your overdraft.
Credit card companies usually charge very high rates of interest on this sort of cash advance, higher than you would pay with most overdrafts.
However, 0% money transfer credit cards allow you to transfer money from your card at 0% interest for an introductory period.
This is very similar to a 0% balance transfer. There are only two differences:
1. You’re transferring money from a card to a bank account, instead of transferring a debt from a card to another card.
2. The fee is often higher for a money transfer than for a balance transfer. Money transfer fees are usually around 4% whereas balance transfer fees are typically between 1.5 and 3%.
The longest 0% deal
The longest-lasting 0% deal on the market right now comes from the Virgin 40 Month Balance Transfer MasterCard. As the name suggests, it offers a whopping 40 months of 0% interest on money transfers, as well as on balance transfers.
So if you have a £2,000 overdraft, you could transfer that sum from the Virgin card to your current account to freeze the size of the debt for more than three years.
You will have to pay a fee of 4% though when you make the transfer. On a £2,000 debt that amounts to £80.
You’ll also have to make the minimum repayment on the card each month. If you’re late with a payment, the 0% deal can be terminated and you'll also get a black mark on your credit report.
The other crucial point is that if you haven’t paid off the resulting debt within the 0% period, you’ll then start paying interest at 18.9%.
The Virgin 40 Month Balance Transfer MasterCard is only available until the 9th September, so you’ll need to move quickly in order to take advantage.
There are a number of other cards to consider here though.
MBNA boasts a Platinum Balance Transfer Visa, which comes with a 36-month 0% period of money transfers, and a 2.99% transfer fee.
Meanwhile, Virgin offers a range of other cards which you can use for money transfers.
There’s a 36-month card, 34-month card, 32-month card and 26-month card. All charge 4% for money transfers, though they offer the same 0% periods for balance transfers, with fees ranging from 1.25% to 2.5%.
Or there’s the All Round Credit Card which offers a 24-month 0% period on money transfers, with a much more affordable 1.9% fee.
And don’t forget the various charity credit cards provided by MBNA (including the WWF, National Trust and British Heart Foundation) which also offer a 24-month 0% money transfer period, with a 4% fee.
The rates on offer are significantly less than an overdraft at 19%, but again you’ll only be accepted at this rate if your credit score is good.
If your credit rating isn’t perfect, you may be offered a loan at a higher rate but if it’s below the amount attached to an overdraft then it is still worth going for.
This article is regularly updated to reflect the best deals