How to beat the balance transfer card dearth

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by: bythesea
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Date: Sat, 5 Jun 2010 Time: 5:34 AM
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A few years ago the credit card merry-go-round really hit its peak. So-called ‘rate tarts' could switch their debts from one 0 per cent balance transfer deal to another, never incurring any interest and never having any real motivation to repay their debts.

But credit card providers are in the business of making money and the heyday of balance transfer deals was never going to last long. One-off balance transfer fees of typically 3 per cent were introduced to give providers a chance to make some money out of the rate tarts, but it has long been clear that the number of balance transfer deals and the length of the introductory period would need to be cut.

At the same time, consumer bodies have been piling the pressure on providers to clean up the credit card sector, and their long-term campaign has finally borne fruit. In March a raft of new rules were announced forcing credit card companies to treat customers more fairly and axe some of the more sneaky charges.

Consumers bear the brunt

While this is clearly good news for consumers, many experts reckon that the money card issuers lose as a result of the new rules will have to be clawed back elsewhere. Not only could we see credit card fees become commonplace it could also lead to a dearth of balance transfer deals in the future.

Indeed, the number of balance transfer deals has already fallen significantly during the credit crunch. And within days of the recent announcement of the new rules, Virgin pulled its longstanding best buy 16-month balance transfer card, replacing it with a less attractive 14-month offer. It is now expected that other balance transfer providers will follow suit.

It's not just regulatory pressure that is causing providers to rein in their 0 per cent balance transfer deals. They are also looking closely at the risk of borrowers transferring large debts to them and then defaulting. As a result of the recession card providers are much choosier about who they will accept, as they don't want to take on long-term debts from customers who cannot afford to repay them.

Best balance transfer cards

For the time being, there are still plenty of good balance transfer deals available. If you want to maximise the length of time you can benefit from 0 per cent interest it could make sense to switch now, while there is still a decent choice of deals. Below are five of the best:

Provider Card 0% Balance Transfer period Balance transfer fee APR
HSBC Credit Card 15 months 2.9% 16.9%
First Direct Gold Card 15 months 2.9% 16.9%
First Direct Credit Card 15 months 2.9% 19.9%
Santander Credit Card 15 months 3% 15.9%
Barclaycard Platinum Card Until June 2011 2.9% 15.9%

Correct as of 19/4/10

Long-term outlook

Perhaps you don't want to keep switching your credit card balance every time your 0 per cent deal runs out, or maybe you are concerned about the choices you will have when your current deal comes to an end.

If so, you might prefer a low standard rate credit card that charges you one low rate of interest on any balances transferred as well as on purchases. You don't get the benefit of a 0 per cent introductory deal, but you do get pay a low rate for the long term - much lower than a standard APR. So you don't need to keep switching.

Halifax's Easy Rate Card for example charges 6.9 per cent on purchases and balance transfers, and doesn't charge a balance transfer fee. And Barclaycard's Platinum Simplicity has a long-term rate of 7.8 per cent and also comes with no balance transfer fee.

If you do want a 0 per cent balance transfer card, now is a good time to search the market and apply, while there is still a great choice of deals. But there are longer-term options if you feel it's time to step off the credit card merry-go-round.

About the Author

Read more about credit cards at http://www.confused.com