There's a credit card punch-up going on. In the last eight weeks, 10 new table-topping balance transfers have launched. We've covered the key blows in this email, but now I want to calmly take you through step-by-step how to use this price war to save large, like Jill:
"@MartinSLewis Just saved over £4,000 over the next 3 years following your email on 0% balance transfer credit cards. Thank you :)"
A balance transfer is simply a new card that repays existing credit and/or store cards for you, shifting the debt, so you owe it instead at a cheaper rate. That means more of your cash clears the actual debt. Here are the need-to-knows...1. Today's deals are the best EVER. Almost every deal is improved from a few weeks ago. We've the longest 0% ever at 41mths, and the longest-ever fee-free 0% cards. Yet, as I'll explain, far better than just clicking is using our free Balance Transfer Eligibility Calc to see which cards you've the best odds of being accepted for...
|TOP PICK 0% NEW-CARDHOLDER BALANCE TRANSFER CARDS
|Card||0% length (APR AFTER)||BALANCE TRANSFER FEE (1)|
|Virgin Money (eligibility calc / apply*)||41mths 0% (20.9%)||4% (min £3)|
|Halifax (eligibility calc / apply*)||Up to 40mths 0% (18.9%)||2.46%|
|Tesco (apply*)||40mths 0% (20.6%)||2.69%|
|MBNA (eligibility calc / apply*)||Up to 40mths 0% (20.9%)||2.79%|
|Barclaycard (eligibility calc / apply*)||Up to 37mths 0% (18.9%)||1.5%|
|Tesco (apply*)||24mths 0% (20.6%)||None|
|Halifax (eligibility calc / apply*)||Up to 24mths 0% (18.9%)||None|
|Cards for those with limited or poor credit history|
|Barclaycard (eligibility calc / apply*)||18mths 0% (24.9%)||2.99%|
|Capital One (apply*)||6mths 0% (34.9%)||3%|
|(1) % of debt shifted. Full info: Best Balance Transfers (APR Examples)|
2. Go for the lowest fee in the time you're sure you can repay. Most cards charge a one-off fee of the amount of debt transferred (so 4% is £40 per £1,000). So calculate how long you think you'll take to clear the debt, add a bit for safety, then pick the lowest fee within that. If you can repay in under two years it'll be totally free as there's no fee.
If you're unsure, play safe and go long; the fee's usually trivial compared with needing to pay interest afterwards. Having said that, the 40mth cards have much lower fees than the 41mth card, so it's often worth using these rather than pushing for the extra month.
3. The best-buy table above is IRRELEVANT for most: get a personal best-buy table. Few people can get every best-buy deal. Each lender credit-scores you, and they all do it differently; so where one accepts, others reject. The only way to know is to apply, but that leaves a hard search on your credit file; too many, especially in a short time, hurt your score.
So use our free Balance Transfer Eligibility Calc which shows your acceptance odds for most top cards. This way you can home in on the top deal that you're most likely to get. Plus as the eligibility calc only does a soft search on your file, it doesn't affect your credit-getting ability (you'll see it on your credit file, but lenders usually can't - and where they can, they can't use it).
As Kelly told us: "Legend. Used the eligibility calc, got 35mths 0% and shifted £11,000 from 29.9%. Shocked by the savings." That's a saving of £4,900 if it's cleared within the 35mths.
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I sat with a MoneySaver who had large costly credit card debts & a poor credit history. The eligibility calc showed zero chance of all balance transfers, except Halifax at 20%. She asked: "Is there any point?"
I explained that as it was the only thing she needed credit for, 20% chance is better than nowt and the worst that can happen is she doesn't get it. She applied and got a 26mth 0% card - £1,500 limit.
Equally it's worth understanding that even a 95% score means one in 20 gets rejected.
5. Some cards' 0% lengths are 'up to', so you may get a shorter deal. This is done based on your credit score (we always list alternative non-'up to' deals as well). The only way to know is by applying; however, as a loose indication, a higher eligibility calc score gives more chance of getting the longest deal.
What if the eligibility calc only shows 'up to' cards? I saw this recently while helping someone at my TV roadshow. It shows no fixed-length 0% cards want you, so it's likely you've a weak credit score, and you'll likely get a shorter length than advertised. Sadly there's no way to know who'll give the longest in these circumstances; it's a case of suck it and see.
6. 100% pre-approval is possible on two top 0% cards. Within the eligibility calculator, we currently have two top cards some can be pre-approved on. They're the Virgin Money (eligibility calc / apply*) 41mth 0% card with a 4% fee and the MBNA (eligibility calc / apply*) up to 40mths 0% for a 2.79% fee (both are 20.9% rep APR after).
If you get 100% pre-approval it means (subject to an ID & fraud check) you know if you'll get that card, and even though the MBNA's an 'up to' card, it means you will get the full 40mths. There's no impact on your credit score, though of course if you then apply, that will mark your file.
7. Even 41mths 0% isn't long enough for me, what can I do? One option, if you've a decent credit score, is before the 0% ends, simply shift the debt again to a new balance transfer deal. But safer is to go for a much longer term cheap deal.
- 5 years at 4.9% (0.5% fee). The MBNA 5 (eligibility calc / apply*) is 5yrs 4.9% with a 0.5% fee for debt shifted within 60 days (8.9% rep APR after).
- 6.4% (no fee) until the debt is repaid. The AA (eligibility calc / apply*) and Lloyds Platinum (eligibility calc / apply*) offer 6.4% rep APRs. While technically 'variable rate', the rate-jacking rules mean if you shift debt to it early, and they try and increase rates later, you can reject those as long as you don't borrow more (and meet at least the min repayments).
All these cards are 'representative' APRs, meaning sadly only 51% of accepted customers need get that rate; the rest can be charged more.
8. Are 0% loans possible too? The answer's yes-ish. And they're useful for clearing overdrafts too. This is a feature of just a few balance transfer cards called 'money transfers'. They mean, usually within 60 days of getting one, you can pay cash into your bank account to use at will, so you then owe the card instead.
To do it, ask for a money transfer. Here are the top picks...
- Virgin Money (eligibility calc / apply*) is 32mths 0% on balance and money transfers, for a 1.69% fee, min £3 (19.9% rep APR after).
- MBNA (eligibility calc / apply*) is up to 32mths 0% with a 1.14% balance transfer fee and up to 24mths 0% with a 1.99% money transfers fee (20.9%/22.9% rep APR after).
9. The balance & money transfer GOLDEN RULES. Getting the right card's only half the job...
a) Repay at least the set monthly min, or you can lose special rates.
b) Always clear the card/shift again before the 0% ends, or rates jump.
c) Don't spend/withdraw cash on them, it's rarely at the cheap rate.
d) Unsure what to pick? Use our Which Card Is Cheapest? tool.
e) Check if you can use existing credit first. See Credit Card Shuffle.
10. Balance transfer common questions (& the answers too, obvs)...
- Can it clear multiple cards? Yes, if the new credit limit's big enough.
- How big will the credit limit be? That's a toughy; so far we've no way to know what the limit will be for each card and it can vary.
- My credit limit is not big enough. What should I do? Balance transfer what you can across to the 0% card. When done, apply for another card for the rest, and fingers crossed you're accepted. However, each subsequent application can get more difficult.
- Can I transfer the whole credit limit? Usually not. Most let you do 90%-95% of it, as they want to leave room for you to spend (avoid that).
- Can I use it to clear store cards too? Yes, it works the same way.
- Should I use savings to clear the debt instead? If it's costly debt this is usually the best plan. See my repay debt with savings guide.
- I also want to do new borrowing cheaply, can I? If you've already got debt, you should be very careful about getting more. However if you must, you want a top 0% spending card. If you need to shift debts too, see top 0% balance transfer & spending all-rounder cards.
- My credit score is poor, what can I do? There are lots of things that can help over the long term; read my 36 credit score boosting tips.
Can't sleep because of your debts? This isn't for you. I've three tests for debt crisis: a) If you can't meet your minimum repayments b) If your non-mortgage debts are more than a year's after-tax salary c) If you aren't sleeping due to worries about debt.
If any affect you, the above is the wrong solution. Instead, get free debt-counselling help from Citizens Advice, StepChange or National Debtline. Or, if struggling emotionally too, CAPUK. Full info: Debt Crisis Help.
This article first appeared in the weekly email on 27 July 2016. Its contents were fact-checked and updated on 2 August 2016.
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