Since the recession, banks and lenders have been under fire for supplying clients with interest rates that are more damaging to their finances than helpful. Many people found themselves applying for credit cards from companies that operate online in order to try and repair their financial situation, only to find out that these companies’ interest rates are high, and there are often hidden charges involved.
Therefore, high street banks found that they had increasing numbers of customers with bad credit scores. In order to combat this, many banks are now offering credit cards with 0% APR on balance transfers from other credit cards. Barclaycard has just launched a Platinum credit card with 0% APR on balance transfers for 30 months, which is the longest 0% offer for any credit card on the market. Though this seems like an excellent deal for those who wish to save money on repayments, research undertaken by TotallyMoney.com shows that 25% of clients who are approved for a balance transfer credit card end up missing a monthly payment. With most credit cards, this means that the 0% offer is then terminated, and the normal purchase interest is then charged, which can be anything between 18 and 27%.
However, for those who are able to keep up the repayments, a 0% balance transfer card can be a great way of getting out of debt. Will Becker, CEO and co-founder of Totally Money comments:
“It’s great to see the credit card market rife with competitive new deals for consumers. Barclaycard’s new 30 month Platinum 0% balance transfer deal is the longest we’ve ever seen and can save people with the average balance transfer of £2,167 an incredible £715 in interest over the term. However, consumers must ensure they make at least the minimum repayment on time every month or they risk being forced to pay the purchase APR on their balance which is on average around 18%. This is the case with the majority of balance transfer deals.”
Missing card repayments is damaging to an individual’s credit score, and yet 24% of credit card holders default on their credit card payments every year. 0% balance transfer card are now so popular that 68% of all credit cards come with the option to transfer balances from other cards with 0% interest. There is usually a fee for the transfer however, which with the Barclaycard Platinum card is 2.9%, so taking into account that the national average balance transfer amount is £2,167, a transfer to Barclaycard would cost £63. Other cards offer cheaper transfers, but these do not offer the same long term offer.