Credit cards that offer cheap cash

September 29, 2006

By Peter Kenny

Credit card companies are upping the ante in their effort to get more customers. This time last year the average balance transfer offer was 9 months, this year it has risen to 12 months.

The major drawback with these 0% balance transfer offers is the inclusion of a balance transfer fee. This fee can very often be up to 3% of the balance that is to be transferred and more often than not the fee has no maximum. This of course can take away a huge chunk of the incentive to change credit cards.

M&S Money brought out an interesting report this week pointing out the hidden costs of a credit card with a 0% balance transfer offer. M&S stated that customers transferring their balance to a credit card with a balance transfer fee could be worse off. The balance transfer fee is an up-front cost and is based on the full balance.

Now this is the point where many consumers are caught out, the balance transfer fee is charged interest from day one. The way payments are allocated to an account is always in the credit card companies’ best interest! Payments are applied to the lowest interest-bearing amount, in this case, the balance that is charged at 0%. The balance transfer fee that has been applied up-front will be charged the standard APR of the credit card.

An alternative to a 0% balance transfer credit card loaded with a fee could be a credit card that offers a long term or lifetime low balance transfer rate. Of course M&S have one of these cards, hence the reason for their report, however, there are some very valuable points that have been made.

The cheapest personal loan on offer is around 5.7% APR. If someone was thinking of taking out a personal loan to cover some of their debts or if they were thinking of making a major purchase, then instead of a loan they might be better opting for a credit card with a lifetime balance transfer offer.

By taking the M&S &More credit card as an example, their &More MasterCard offers a deal of 0% on all purchases for the first 12 months and 3.9% APR on any balance transferred for the life of the balance. As you can see the APR of 3.9% is a huge difference to the current lowest personal loan of 5.7%. As a further bonus M&S will not charge a balance transfer fee.

Credit Card	Balance Transfer Rate	Period	Standard APR
M&S &More	3.9%	lifetime	16,9%
Barclaycard Flexi-Rate*	4.9%	lifetime	16.9%
Intelligent Finance	4.95%	lifetime	11.9%
Lloyds TSB Advance	5.5%	lifetime	15.9%

* Balance transfer fee of 2.5%