A new top balance transfer credit card!

A brand new balance transfer card has just launched that is even better than the 0% Virgin Money card!

We're huge fans of interest-free credit cards here at lovemoney.com. There's no better way to attack your debts than moving your balance onto a fantastic 0% balance transfer credit card.

But as great as they are, balance transfers come with a bit of a sting in the tail. Normally, you'll be charged around 3% of your outstanding balance as a fee when you transfer your debts over to your new card. So, that means for every £1,000 you transfer, you'll have to pay the credit card company £30 for the privilege. Ouch!

Fee-free transfers

But, this week, the rules changed when MBNA launched its Platinum Plus Credit Card: a balance transfer card which doesn't have a transfer fee!

Unfortunately, there's one pretty huge drawback: the balance transfer itself isn't actually interest-free. But before you stop reading, this isn't as bad as it seems.

MBNA are charging a super low rate of just 1.9% on balance transfers for the 12 months. Now I wouldn't blame you for thinking there's no way that can measure up against the many interest-free cards on the market, but you'd be surprised.

Let's see how Platinum Plus compares with the best 0% balance transfer on the market and lovemoney.com favourite, the Virgin Money Credit Card.

MBNA versus Virgin

So to sum up, in one corner we have MBNA's low rate, fee-free card and in the other corner we have Virgin's interest-free card with a 2.98% fee.

Let's say you have a balance of £3,000 to transfer and you intend to clear it completely via 12 equal instalments over a year. The table below reveals which option is the cheapest:

MBNA versus Virgin: over 12 months

	MBNA Platinum Plus	Virgin Credit Card
Balance	£3,000	£3,000
Handling fee	£0	£89.40 ( or 2.98%)
Interest rate for 12 months	1.9%	0%
Monthly repayments	£254.26	£257.45
Total amount repaid over 12 months	£3,051.55	£3089.40
Cost of credit	£51.11	£89.40

So, surprisingly, even though MBNA charges a rate of 1.9%, the fact that it doesn't demand a 3% handling fee from you makes it £38.29 cheaper than Virgin's interest-free card over a year.

But the Virgin deal actually lasts for 16 months, whereas MBNA's ultra low rate runs out after only 12. Once the special introductory period has come to an end after a year, the interest rate then shoots up to a scary 15.9% APR. So if you hadn't cleared your balance by then, you'd start paying a much higher rate of interest on your debt than you would be paying on the Virgin card.

So, if you spread your repayments into more affordable chunks, over 16 months rather than 12, which card would come out on top then?

MBNA versus Virgin: 16 months

16 months	MBNA Platinum Plus	Virgin Credit Card
Balance	£3,000	£3,000
Handling fee	£0	£89.40 (or 2.98%)
Interest rate for 16 months	1.9% for the first 12 months then 15.9%	0%
Monthly repayments	£191.38	£193.09
Total amount repaid over 16 months	£3,062.08	£3089.40
Cost of credit	£62.08	£89.40

Over a 16 month period MBNA is still the winner with the total cost of credit coming in £27.32 cheaper than Virgin. It's true we're not talking mega savings by choosing one option over the other. But the point is, just because something looks like a better deal on the surface, it doesn't necessarily mean it will stack up once the numbers have been crunched.

So, whichever way you look at it, MBNA's new launch is better than Virgin's ever-popular card - if only by a small margin. And it's the same story if you're transferring a balance of £1,000 or £10,000.

Are you convinced?

If you like the look of the new MBNA card, you can only apply via MBNA's website. But, don't forget, balance transfers have to be made in the first 90 days after opening the account to qualify for the great 1.9% rate. If you make a transfer after this time, you'll have to pay a nasty handling fee of 3% which will completely wipe out the cost benefits of the card.

The ultra low rate also applies to money transfers made in the first 90 days. You could, for example, transfer some cash from the card into your current account to clear your overdraft. A tiny rate of 1.9% will almost certainly be a whole lot cheaper than your current overdraft rate. But again don't act too slowly because after the 90 day deadline, a 4% handling fee will kick in.

And finally, if you're already Virgin Credit Card holder or you have any other credit card provided by MBNA, I'm afraid you won't be able to transfer any outstanding balance and take advantage the 1.9% rate. But, for everyone else, I think MBNA have really struck gold here. Or should that be platinum?!

Compare credit cards at lovemoney.com

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