Pay less to switch credit card debt

Got credit card debts? Thousands of Britons do but the start of a new year is the perfect time to get your credit card borrowing under control.

16:39 27 January 2013

And this year, switching your debts to an interest-free card has become particularly attractive due to three of the country's biggest credit card providers slashing their balance transfer fees in half.

Bank of Scotland, Lloyds TSB and Nationwide are all offering massive 50% discounts on the cost of switching to their 0% balance transfer cards.

These offers will not last forever though, so you need to get your skates on if you want to benefit.

But to ensure you pay as little as possible for your credit card debts, it is also vital to compare them with other deals on the market.
Luckily, MoneySupermarket is here to do the hard work for you.
 
The 2013 balance transfer fee sale

 

On December 21, Nationwide Building Society announced that it was halving the balance transfer fee on its Select and Standard Credit Cards, both of which offer 20 months at 0%, for existing and new customers respectively.

The fee that will be added to your balance if you take out one of these cards has therefore fallen to 1.55% of the total transferred.

On January 2, meanwhile, Bank of Scotland pledged to refund 50% of the 3% balance transfer fee on its Platinum credit card, which offers 18 months at 0%, to all customers who apply before February 23 and make a transfer before March 23.

And now, Lloyds TSB has also waded in with a 50% refund on balance transfer fees for customers taking out a Lloyds TSB Platinum credit card online - meaning they will pay just 1.5% for 21 months interest-free borrowing.

As with Bank of Scotland, the offer is limited to new customers who open an account before February 23 and transfer a balance within a month of that date.

Mark Powys, head of credit cards at Lloyds TSB, said: "January is always a popular time for customers to review their finances. With this in mind, I'm delighted to offer new customers this fantastic deal."
How much you can save
The latest figures from debt charity Credit Action indicate that total credit card borrowing in the UK stands at more than £55 billion.

But while some people owe more than £10,000 - often spread over two or three cards - most people switch debts of between £2,000 and £3,000 to balance transfer cards.

The difference between paying a 3% balance transfer fee and a 1.5% balance transfer fee on a debt of £3,000 is £45.

And, as this is all you would pay for interest-free borrowing on the Lloyds TSB Platinum card, for example, switching that amount from an average credit card charging an APR of 17.32% would save you about £400 in interest over the next 12 months alone.

Over the 21-month term of the 0% deal, meanwhile, the savings could be still be great.

 

Other balance transfer contenders

 

While the three lenders mentioned above have certainly made their cards more attractive by slashing their balance transfer fees, they are far from the only competitive deals available.

 

Barclaycard still holds the title for the longest 0% balance transfer deal on the market.

Its Platinum Credit Card with Extended Balance Transfer charges no interest at all on transferred debts for two whole years.

But if you think you can pay off your credit card balance in less time than this - say 18 or 21 months - it is worth bearing in mind that the hefty 3.2% balance transfer fee will make this card a more expensive option.

On a £3,000 debt, the fee added to your Barclaycard balance would be £96, or £51 more than you would pay with the Lloyds TSB card.

For those who think they can clear their debts within the even shorter time of a year, meanwhile, Barclaycard has the top deal again: its Platinum Lowest balance Transfer Fee Card charges a fee of just 0.9% for 12 months at 0%.

On a £3,000 debt, that means just £27 being added to the balance on transfer.

Alternatively, you could choose to escape balance transfer fees altogether by paying a low rate of interest - the NatWest Visa Low Rate Credit Card for example, charges just 2.9% for the first 12 months - on your debts.

 

The risks of 0% cards

 

Whichever 0% card you choose to switch your balance to, it is vital to avoid allowing your debts to overrun the relevant interest-free period.

This is because all of these cards will sting you with big interest charges from the day your 0% deal comes to an end.

The Lloyds TSB Platinum card, for example, has a representative APR of 17.9% (variable) once its 21-month interest-free period comes to an end.

And the Barclaycard Platinum Lowest balance Transfer Fee Card charges an above-average representative 18.9% (variable) on any debts not cleared within 12 months, compared to just 9.9% (variable) with the NatWest Visa Low Rate Credit Card.

It is also worth pointing out that you will need an excellent credit score to qualify for the best balance transfer card deals, and that the debt you need to switch must come from another card provider.

 

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