Consumers stand to benefit as lenders compete to offer better rates and longer balance transfer periods
Forget Isa wars: the real battle for your money is going on between credit card providers.
Barclaycard has stretched the zero interest period on its balance transfer from 18 months to 20 months, just weeks after it had lengthened it from 16 months, and just days after MBNA and Virgin Money increased their interest free periods to match Barclaycard's offer. As these companies both charge lower balance transfer fees, they immediately took top slot in the best buy charts.
Barclaycard's balance transfer fee on the new deal is 3.2%, an increase on the 2.9% that it previously charged, and higher than the 2.88% charged by MBNA and Virgin. But Andrew Hagger of product comparison website Moneynet.co.uk said Barclaycard still proves cheaper, despite the higher fee. He calculates that someone switching a �1,000 balance from a card charging 18% APR to MBNA's card would save �241 in interest once the �28.80 balance transfer fee had been deducted. But if he transferred the �1,000 balance to the Barclaycard, he would save �268 once the �32 balance after deduction of the transfer fee.
Kevin Mountford, head of banking at moneysupermarket.com, said: "This competition is welcome news for those consumers who are in a position to take advantage of this price war and consolidate any existing credit card balances on to cheaper deals. However, consumers need to be aware that most lenders are giving these deals to customers who have excellent or good credit histories. If you fall outside of this category then you may find your options are more limited. Before applying for a credit card, consumers need to check their credit profile and make sure there is no adverse information that would jeopardise their chances of being accepted."
People who apply for cards but are rejected may find that this impairs their credit records even further: lenders leave imprints on an applicant's record which shows they have made an unsuccessful application, which will deter other lenders.
Moneysupermarket.com has a personal credit profiling tool that helps people identify and apply for the most appropriate card based on their personal circumstances - without leaving an imprint.
"Despite these great offers, cardholders still need to make sure they use their cards wisely and aim to pay off the balance by the end of the promotional period. It is also worth looking at the small print at the balance transfer fees as these vary by provider."
So what next? Two year interest free periods? Mountford said: "I wouldn't be surprised to see other lenders react accordingly by launching similar deals, but with so many vying to go top of the best buy tables, we could see even longer deals emerge."
Source: http://www.guardian.co.uk/money/2011/mar/17/credit-card-price-war-barclaycard
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