0% Versus Low Interest

I realise at first glance the there is no contest. Why pay interest when there is the offer of a 0% deal. Of course the 0% deal on say balance transfers or purchases can be very attractive but have you thought the whole thing through? Let me explain, if you have a balance to transfer over to a new credit card offering a 0% APR on all balance transfers for say the first six months. Now if you do not manage to pay off your balance transfer within the promotional period, the deal reverts to a higher APR (the credit card company has to make money sometime!) You could end up paying more in interest.

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I know you can maybe move on to a new credit card with another 0% balance transfer deal, however, credit card companies are aware of this trick and are becoming more strict with who the accept and if they feel you are just playing the field (rate tart) you will be refused their credit card. Even if you are accepted there are only so many times you can change.

There are now a number of that realise that many people cannot pay off their balance transfer within the promotional period and have came up with a low APR deal on all balance transfers for the life of the transfer. This means you can plan your finances for the long term and pay of your outstanding balance in a time frame that suits you.

Let me show you this example:

Card A
0% Balance Transfers for 6 months
APR – 14.9% Card B
5.9% APR on all balance transfers for the lifetime of the balance transfer
Outstanding credit - £3000

Time to pay off balance – 12 months

Card A
Balance transfer Interest charges
6 months – free
6 months - £123.42

Card B
Balance transfer Interest charges
12 months - £94.20

Card B saves you £29.22

Time to pay off balance – 18 months

Card A
Balance transfer Interest charges
6 months – free
12 months - £231.84

Card B
Balance transfer Interest charges
18 months - £138.30 Card B saves you £93.54

As you can see when choosing your next credit card do not be dazzled by 0% offers look at your finances sensibly and calculate just how much a credit card will cost you in the long run.For a low interest credit card try our Capital One credit card and for a 0% balance transfer credit card try the Virgin credit card.