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UK PROPERTY NEWS & ADVICE


Making The Most Of Your Credit Cards

It seems Britain is rapidly becoming a nation of “rate tarts”; this charming term (not, I hasten to add, mine) refers to the practice of sticking with a card for as long as the introductory deal lasts then moving on to take advantage of a similar deal on another card.

A survey by Abbey has found that 6.5 million Brits plan on moving their balance to a new card in the next year – an increase of 5% on the previous year. Over half of them said that they were transferring their balance to take advantage of an interest free introductory offer.

This is hardly surprising really; I’m actually amazed there’s anyone left still paying interest. After all there’s certainly no shortage of 0% cards to choose from, in the seven years since Egg launched the UK’s very first interest free balance transfer credit card 0% cards have inevitably come to dominate the market. These days pretty much all the big banks offer one and, happily, a competitive market means there are plenty of genuinely impressive deals out there.

So what excuse could you possibly have for not taking advantage of such deals? Well, making significant savings on a 0% card does require some degree of organisation and self-discipline, if you forget to switch cards before the introductory period expires you’ll suffer the effects of a sharp increase in the interest you’re being charged – post interest free period most of these cards will hit you with fairly high standard rates. This is what makes it worth the lenders while to offer such apparently generous deals; they bank on the likelihood of a good proportion of borrowers forgetting or not bothering to switch. For some simply finding a card with a good standard rate a sticking with it may be the best option.

Another potential downside is that an excessive amount of balance transfers in a short period of time has the potential to negatively affect your credit rating making it harder to get competitive deals. The simple solution is to make sure you spread out your applications. Getting the balance right, so that you’re not switching to new cards too frequently yet don’t leave it too late and run the risk of not moving your balance before the introductory period expires again requires a bit of organisation. It’s worth planning in advance, particularly if you’re juggling several cards, and setting up reminders.

So, the big question: Which card to go for? As I’ve said there’s a hell of a lot of interest free deals out there and to an extent your choice depends on your particular needs. The principle points to consider however are how long the interest free period lasts and how big the fee is. At the moment the top deal when it comes to the length of the interest free offer is the Virgin card which offers an impressive 15 months. The only downside with the Virgin card is that the fee (2.98%) is somewhat less competitive. Alternatives with slightly smaller fees are the Barclaycard platinum and the Natwest Credit Cards which both charge a 2.50% fee and offer 14 and 13 months respectively.

The key benefit of a 0% period is that it gives you a chance to really attack your credit debt without your efforts being undermined by interest payments, to do this effectively you’ll need to avoid using your card for anything else. Sadly this means no spending on the card until you’re debt free – because the interest rate on purchases is likely to be considerably more expensive on a balance transfer card by spending on it you’d be effectively negating the positive saving potential.

Once you’ve paid off your debts however another question to give some consideration is what extras the card comes with. This should probably be a secondary factor but there are some good offers out there including cashback and other rewards – Asda’s 0% credit card allows you to claim back on groceries and you can get an mp3 player for spending £250 on the Sonycard platinum for instance.

Here’s an overview of a few of the leading interest free deals:

Company

Product

Balance transfers
(rate and period)

Typical APR

NatWest

0% Credit Cards

0% p.a. for 13 months
(2.5% fee)

13.9%
(variable)

Barclaycard

0% Credit Cards

0% p.a. for 14 months
(2.5% fee)

14.9%
(variable)

Asda Finance

0% Credit Cards

0% p.a. for 9 months
(2.5% fee)

16.8%
(variable)

Virgin

0% Credit Cards

0% p.a. for 15 months
(2.98% fee)

15.9%
(variable)

RBS

0% Credit Cards

0% p.a. for 13 months
(2.5% fee)

13.9%
(variable)

Mint

0% Credit Cards

0% until 1st December 2008
(2.5% fee)

14.9%
(variable)

Figures taken from Motley Fool Credit Cards, correct at time of writing.

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