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Transfers can cut overdraft charges

Man at a cashpoint4/2/14

By Daniel Machin

Current account holders could dramatically reduce their overdraft charges simply by playing their cards right.

The independent Consumer Intelligence organisation claims customers should seriously consider using zero per cent money transfer cards.

While normal balance transfers let you shift debt from other credit cards, money transfers allow you to move cash from the card to your bank account.

MBNA recently launched a 0 per cent for 29 months deal which allows customers to transfer to their current account - and it is now the most attractive deal on the market.

Potential significant savings

The savings are potentially significant. For instance, someone with a regular £1,000 overdraft at a competitive rate could be paying £360 in interest over 29 months.

If they used a money transfer card, however, the only cost is the 4 per cent fee for transferring the money - £40 on £1,000 - adding up to total savings of £320.

Research from Consumer Intelligence reveals that 39 per cent of current account customers are often, if not always, in the red.

These people could therefore potentially benefit from using the cards on offer, saving themselves a significant amount of money.

Most competitive deals restricted to great credit ratings

The most competitive deals are restricted to those with great credit ratings, as lenders assess applicants on a number of different factors including existing levels of debt.

The typical money transfer fee of around 4 per cent are higher than the fees charged by 0 per cent introductory rate balance transfer credit cards which typically charge 2.5 per cent to 3 per cent.

In most cases, consumers will have to do the money transfer within 60 days of opening the card to benefit from the 0 per cent introductory rate.

"Money transfers are something of a hidden secret", said David Black of Consumer Intelligence.

"But, despite the flat charge, the right deal can make a lot of sense to help reduce the cost of expensive unsecured borrowing."

Money transferred straight to your current account

Black added: "Unlike a balance transfer which sees the money transferred to another credit card, a money transfer deal actually transfers the money straight to your current account.

"It really makes sense to review your borrowings as interest rates and charges can vary considerably even from the same lender."

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