Is this credit card the new leader of the pack?
This article was first sent to readers as an afternoon email.
The thought of spending on credit probably makes you twitch and snort. 'Isn't that what got us into all this trouble in the first place?' I hear you cry. And broadly speaking, you'd be right.
However, credit cards do still have their uses. It's definitely a bad idea to run up credit card debt if you can possibly avoid it. But if you already have a credit card balance, you could save hundreds of pounds in interest every year by transferring that debt to a card which offers 0% on balance transfers.
A new 0% BT credit card has just been launched, which its backers hope will steal a march on the current market leader.
Here, I'm going to look at whether it does what it says on the tin.
The incumbent
Here at lovemoney.com, we've been banging on about the Virgin Money card for months. Offering 0% on balance transfers for a whopping 16 months, it used to stand head and shoulders above the competition.
The other big advantage of the Virgin Money card is that money transfers are also charged at 0% interest.
So for example, you can transfer interest-charging debts (like an overdraft or personal loan) onto the card alongside the balances from other cards, and this debt will accrue no interest for the same 0% period.
However, if you don't keep a beady eye on your deal, things can go very wrong. Several readers have complained about high APRs being charged at the end of the 0% period, and of their 0% deals being whisked away following very minor payments oversights.
Read my previous article - Is this really the best credit card on the market? - to find out more.
The challengers
In recent weeks, the Virgin Money card has cut its 0% period to 15 months. That puts it on the same level as the HSBC MasterCard, which also has a 0% BT period of 15 months.
And another 0% contender has emerged hot on their heels: The new Abbey Credit Card offers 0% balance transfers for 15 months, too.
Here are some facts and figures to help you compare the three:
|
|
Virgin Money |
HSBC MasterCard |
Abbey Credit Card |
|
0% BT period |
15 months |
15 months |
15 months
|
|
Transfer fee |
2.98% (min. £3) |
2.9% (min. £5) |
3% (min. £5)
|
|
Typical APR (%)
|
16.6% |
16.9% |
15.9% |
|
0% new purchases? |
six months |
three months |
three months |
The verdict
On balance, I think the Virgin Money card still comes out on top - just - because of the 0% money transfer option it offers.
The other main difference between the cards is the longer 0% period on new purchases offered by Virgin (six months).
However, I wouldn't count that as a major point in its favour. Now is certainly not the time to be putting new spending on credit cards. And if you really don't have any other option, there are other cards that offer longer 0% new purchase periods.
I would put the HSBC MasterCard in third place. Not only does it have a higher typical APR than the other two (16.9%), but it's only available to existing HSBC current account customers. That's a pretty big catch!
Long term alternatives
If think you might not be able to clear your balance in 15 months, consider taking out a credit card than offers a low fixed rate for the life of the balance.
For example, the Natwest Classic MasterCard charges 8.9% APR, for as long as it takes you to clear your balance. And, unlike the cards listed above, it charges no balance transfer fee.
Just remember that you're still paying interest (albeit at a lower rate), so it's important you clear your debt as quickly as possible.
Good luck!