Choosing the right balance transfer credit card
Image © David Lee – Rex Features
We look at the best credit cards for balance transfers in the short, medium and long-term.
If you've built up some debt on your credit card, balance transfer cards are one of your best debt-fighting weapons.
These credit cards can massively reduce - or even abolish - your interest bill.
But to get the maximum benefit you need to pick the right card for your situation. In this article, we're going to highlight some of the best balance transfer cards on the market.
But before we come to that, you need to figure out how quickly you can clear your credit card debt. If you reckon you can pay off your debt in six months, you should probably go for a different card from someone who will need two years.
So let's look at the best balance transfer cards for different time periods.
Two years or longer
Sadly, there are no cards that offer 0% periods for as long as two years, let alone three.
So if you think you'll need a long time to clear your debt, you have two options:
1. Go for a low APR card
As the name suggests, a low APR card isn't a 0% card, so you will have to pay interest. But the interest rates are far lower than on most cards. That means you can take your time with the repayments and pay a low interest rate for a long time.
The best two cards in this category are the Sainsbury's Low Rate Credit Card and the Barclaycard Platinum Simplicity card. You'll only have to pay 6.9% APR with the Sainsbury's card while the Barclaycard charges 7.9%.
The great thing about these cards is that you don't have to pay a balance transfer fee. If you go for a 0% balance transfer card, you normally have to pay a fee that is around 3%. But that's not the case here.
2. Go for a 0% card and then take out another one later
You could take out a 0% card now and when the 0% period expires, transfer your remaining debt to another 0% card.
If you follow this strategy, your best bet for now is probably the Barclaycard 22 Month Platinum Visa card. The 22-month 0% period is one of the longest on the market while the 2.9% fee isn't too bad.
Just remember that the 0% card market may not be as attractive when you have to transfer again in 22 months. Rates and fees might be higher.
One to two years
If you think you can clear your debt within 16 months, then we'd recommend the Barclaycard Low Fee PlatinumVisa. Yes, there are cards with longer 0% periods, but this Barclaycard comes with an attractively small fee - just 1.6%.
The Virgin All Round Credit Card is almost as good. It has a 16-month 0% period with a 1.99% fee.
Your other option is the Halifax Clarity Card. It doesn't have a balance transfer fee, but it does charge 2.9% interest.
However, 16 months is just too short a period for some folk. If you need more time, the longest 0% card is the HSBC Visa which has a 23-month 0% period. However, the balance transfer fee is on the high side at 3.3% and the card is only available to existing HSBC current account customers.
So if you can pay off the debt one month more quickly, you should go for the 22-month Barclaycard we mentioned earlier as it has a lower 2.9% fee.
It's important to stress that you'll pay a lot less money if you go for one of the 16-month cards. Here's a comparison of the different cards assuming you have a £3,000 debt.
Paying off a £3,000 debt over 16 to 23 months
| Card | Debt repayment period | Monthly payment | Fee/cost of fee | Interest rate | Total cost |
|---|---|---|---|---|---|
| Barclaycard Low Fee Platinum Visa | 16 months | £190.50 | 1.6%/£48 | 0% | £48 |
| Virgin All Round Credit Card | 16 months | £191.20 | 1.99%/£59.70 | 0% | £59.70 |
| Halifax Clarity Card | 16 months | £190 | £0 | 2.9% | £61 |
| Barclaycard 22-Month Platinum Visa | 22 months | £140.30 | 2.9%/£87 | 0% | £87 |
| HSBC Visa | 23 months | £134.70 | 3.3%/£99 | 0% | £99 |
So if you go for the HSBC Visa, you'll have a relatively low monthly payment, but you'll also have to pay a higher fee and the debt will hang over you for a longer period.
One year or less
If you think you can pay off your debt more quickly, then the Halifax Clarity Card becomes much more attractive. The shorter the repayment period, the more attractive the Halifax card becomes. That's because you'll pay less interest as you're borrowing for a shorter period. And, of course, you're not paying a fee.
Whereas with the low APR cards, your fee is the same regardless of how quickly you pay off the debt.
Look at this table:
| Card | Debt repayment period | Monthly payment | Fee/cost of fee | Interest rate | Total cost |
|---|---|---|---|---|---|
| Barclaycard Low Fee Platinum Visa | nine months | £339 | 1.6%/£48 | 0% | £48 |
| Virgin All Round Credit Card | nine months | £340 | 1.99%/£59.70 | 0% | £59.70 |
| Halifax Clarity Card | nine months | £337 | £0 | 2.9% | £34 |
So over nine months, the Halifax card is easily the best. What's more, if your main current account is with Halifax, you can also earn £5 in cashback on the card every month - as long as you spend at least £300 on the card.
So there you have it, we've rounded up the top balance transfer cards for you. Whichever card you pick, you'll almost certainly do better than leaving the debt on your existing card, which is probably earning interest at 17% or higher.
My advice to anyone in credit card debt is:
1. STOP spending on things 'non vital' 2. Never pay only the monthly minimum on credit cards or you will never get out of debt. 3. Take out another credit card with the best 'interest holiday' transfer the debt from your old card and cut it up. 4. In the 'interest free' period of the new card concentrate on paying off that debt, before you have to pay interest. Do without, go without and don't buy anything new until you are out of debt and can afford to pay cash. Remember if you only pay the minimum you will be paying interest on the interest.
When you are out of debt change your credit card to one with 'Rewards' and set up a standing order to pay the full amount each month. And you'll live happily ever after.
