New credit card launches spell good news for borrowers who are prepared to shop around.
By Esther Shaw
Borrowers are set to benefit from a price war erupting among credit card providers as they battle it out for top spot in the “best buy” tables.
Both Barclaycard and Marks & Spencer Money have launched market-leading promotional offers – pushing the average promotional length on both balance-transfer and purchase credit cards to an all-time high.
Best balance-transfer deals
The balance-transfer market has become increasingly competitive over the last few months, and Barclaycard’s latest offering, an 18-month deal at 0 per cent for those taking out a Platinum card, is the longest introductory period ever seen.
The provider had previously launched a 17-month interest-free balance transfer deal with an annual percentage rate (APR) of 16.9 per cent, but when Nationwide matched this last month with a 17-month deal at an APR of 15.9 per cent, this prompted Barclaycard to increase its 0 per cent deal to 18 months.
The 18-month Barclaycard deal has a 2.9 per cent balance-transfer fee, and the Nationwide 17-month deal has a 2.95 per cent fee.
Several other providers currently offer 16-month interest-free introductory deals on balance transfers, including MBNA Platinum, NatWest Platinum and Virgin.
Top purchase deals
For those looking to spend, M&S Money has launched a new deal offering 15 months interest-free credit on purchases, with a typical rate of 15.9 per cent.
This puts it ahead of the rest of the pack, as the next best deals include the NatWest Classic card, the Royal Bank of Scotland Classic card, and the Tesco Clubcard, all of which offer 0 per cent introductory deals for 13 months.
How do the current deals stack up?
Looking back, the longest 0 per cent balance transfer deal in March 2008 was 15 months, rising to 16 months in March 2010 – before hitting a high of 18 months now, according to financial analyst Defaqto.
This is great news for card borrowers who have existing debts on their cards, as you now get up to a year and a half to repay what you owe – without being charged any interest at all.
However, you do need to make sure you understand the associated balance transfer fees, as Defaqto found the average fee has risen from 2.73 per cent in March 2008 to 2.81 per cent today.
It’s also crucial that you stay within the terms and conditions of the account – or you could risk losing any introductory offer.
You should always make the minimum payment on time each month, remain within your credit limit, and aim to pay off the balance before the end of the promotional deal. If you’re looking to make a large purchase, use your card wisely, only spend what you can afford and pay off your purchase balances before the end of the promotional period, so you are not stuck with expensive debts once the deal has expired.
Shop around
If you’re prepared to shop around, there are some very attractive introductory offers available at present; there are also hopes that other providers will follow suit.
“The best offers tend to be in the form of introductory deals, so it really does pay to review your card on a regular basis,” says David Black from Defaqto. “This will enable you to see if you can get a better deal elsewhere.”
Borrowers need a good credit rating
While there are some great deals up for grabs, lenders are not opening up these offers to all customers: most are still reserving their best deals for borrowers with the cleanest credit histories.
“Lenders are really concentrating on credit quality and affordability,” says Black. “Long gone are the days when just anyone could get a credit card.”
Before applying for a card, you should check your credit profile to make sure there’s no information held on it that could harm you chances of being accepted.
