Tesco has launched a new market-leading credit card today that doesn't charge a penny on balance transfers. We take a closer look.
A new credit card launched today by Tesco Bank offers borrower’s 10 months interest-free on balance transfers.
This means people paying interest on an existing credit card can transfer their balance to Tesco and avoid these charges for almost a year.
However, what makes the new card really stand out is the lack of a transfer fee – the charge you pay for moving your balance between cards - so you won’t pay a penny for shifting your debt.
Low-fee credit cards
Credit cards offering low or no transfer fees have become increasingly popular over the past few years, according to Nerys Lewis, head of credit cards at Confused.com.
She says: "The balance transfer market has essentially split into two: between those cards that offer increasingly long 0% interest periods and those that offer low transfer fees.
"The cards with longer 0% deals tend to grab people’s attention the most.
"But they can often have higher transfer charges so you’d do well to look at cards with low fees too as you could save some money."
Why longer isn’t always better
Here’s a quick example of why longer isn’t always better when it comes to credit cards.
The Barclaycard Platinum credit card currently offers the UK’s longest interest-free deal on balance transfers - 33 months at 0% interest.
This card charges a 2.99% transfer fee, meaning you pay 2.99% of any amount you move to Barclaycard. If you transfer £2,000, for example, you’d pay a fee of £59.80.
However, you can avoid paying this charge altogether if you switched to Tesco instead.
Is the card right for me?
There are 18 0% cards on the market that offer transfer fees of 1% or lower.
Another option is the Lloyds Bank Platinum credit card, launched last week, which offers 10 months interest-free for a low 0.4% fee.
However, these types of deals won’t be right for everyone, as Lewis explains.
"One of the main things to think about before you apply for a balance transfer is the amount of debt you wish to clear," she says.
Do your sums first
"You should then work out how long it will take to pay it off.
"This will determine the length of the interest-free period you need.
"If you need around two years, say, then you’re probably better off looking for one of the longer 0% deals available.
"But if you decide you can pay off your balance within a year or less then you might want to take a look at a low-fee card."
Think before you apply
Lewis has a few words of caution before you apply for a balance transfer. "Balance transfer cards can be great for people with debt to clear," she says.
"The 0% interest periods mean cardholders can shift a balance from one card to another and, if they were paying interest on their old card, clear their debt while avoiding extra charges.
"However, the best cards, particularly those with the longest interest-free deals or lowest fees, are generally reserved for people with the best credit ratings.
"So if your credit rating is anything less than top notch you’re unlikely to get the very best offers."
Confused.com card matcher
Before you apply you can use Confused.com’s free Card Matcher tool which lets you check your likelihood of acceptance for any of the types of cards on our website.