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Clear your overdraft with a 0% credit card

Handing over a payment cardBeing charged interest on your overdraft? Many people are, and at an average rate of 16.3 per cent.  But did you know you can save money by clearing your overdraft with a 0 per cent interest credit card?

Some balance transfer credit cards let you move credit into your current account.

This is known as a money transfer or a super balance transfer and it can help you avoid interest payments on your overdraft.

Interest-free periods on money transfers range from six to 23 months. There is a fee for this service however, typically in the region of 4 per cent of the balance you’re moving.

But if paying this fee still means saving money on the interest you’re paying servicing your overdraft, then it’s worth considering.

Compare credit cards

Here are some of the best credit cards on the market which could help you pay off your overdraft.

Credit card

Money transfer intro

Money transfer fee

Annual rate of interest

MBNA Platinum credit card

23 months 0% interest

4%

16.9% APR

MBNA Everyday credit card

17 months 0% interest

4%

11.9% APR

AA Balance Transfer

16 months 0% interest

4%

17.9% APR

Fluid credit card

15 months 0% interest

4%

15.9% APR

Capital One Balance

0% until July 2013

3%

34.94 APR

Picking the right card

While the length of the 0 per cent period and the transfer fee are the major factors to consider, you may want to compare other features too when picking the right card for you.

For example, the MBNA Platinum credit card offers 0 per cent on balance transfers from another credit card for 23 months, with a 2.85 per cent handling fee.

So if you’re looking to consolidate debt from your overdraft and another credit card, then this might be the card for you.

Meanwhile, the Fluid credit card, from MBNA, has a handy feature which lets you see if you are likely to be accepted before completing your application.

This could save potential harm to your credit rating of a failed application.

If you’ve made a few applications in a short space of time lenders are more likely to turn you down as it looks as if the applicant is desperate for credit and may be overstretched financially.

The Fluid card also offers 0 per cent on balance transfers from another credit card for 15 months, with a low handling fee of only 1.5 per cent.

And for motorists, the AA Balance Transfer credit card enables you to earn AA reward points every time you spend, including double points when you spend on fuel.

Tidying up your finances

For many people a 0 per cent credit card, whether used for a balance or money transfer, will be used to help consolidate debts.

Mark Huggins, director of AA Financial Services, says the Christmas spending spree will be leading consumers to find ways of tidying up their finances for the year ahead.

Huggins said: "For cards bearing a high interest rate, including many store cards which might have been taken out to benefit from pre-Christmas discounts on gift purchases, charges can mount up.

"A prudent way to deal with big card bills, especially if you can’t afford to pay them off straight away, is to get the interest rate down by consolidating them."

A word of warning

But Nerys Lewis, head of credit cards at Confused.com, adds a word of warning before you make your application.

Lewis says: "Money transfers could be suitable if you're being charged interest on an overdraft or if you're looking to buy something that you either can't use your card for or would be charged a hefty fee.

"But avoid them if you don't think you'll be able to pay back the money within the promotional rate period.

"You'll also need to be disciplined and make sure that you'll pay off the overdraft debt that’s been transferred to your credit card instead of just spending more and dipping back into your overdraft."




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Adam Jolley

Adam Jolley

Adam Jolley is a writer at Confused.com, focusing on credit cards and financial products. Wannabe mountaineer Adam joined us from the world of financial services PR.

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