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Sunday, June 16, 2013

Focus on: Tesco offers 0% on card debt - for no fee
Consumers looking to shift credit card debt to a card charging no interest are not short of choice at the moment. Providers have been tripping over themselves to offer the 'longest ever' 0% balance transfer deals - and, as a result, you can now get as long as 27 months.
But Tesco Bank has changed tack slightly with the launch of its latest credit card and, rather than offering the longest interest-free shelter, has become the only provider on the market not to charge a balance transfer fee to get there. We take a closer look.

What's the deal?

Tesco Bank's new Clubcard Credit Card with No Balance Transfer Fee offers 0% on balance transfers for 12 months. Compared to the market-leading Barclaycard Credit Card with Extended Balance Transfer, which offers 27 months at 0%, Tesco's offering looks a little poor. However it comes with the major advantage of being totally fee-free. In comparison, Barclaycard charges 2.98%.

This means that, while you'd have to shed out £89 to transfer a debt of £3,000 to Barclaycard, you could do it for free with Tesco.

The Tesco card also offers 0% interest on purchases for the first 12 months. And if you do spend on the card, you'll also be able to collect Clubcard points. You'll earn five Clubcard points for every £4 you spend in Tesco stores and petrol forecourts, plus one Clubcard point for every £4 you spend elsewhere.

Who's it good for?

Tesco's offering is ideal for anyone who has existing card debt which they are sure they can pay off within 12 months.

It's also a good option for anyone looking to spread the cost of one expensive purchase, or even a series of smaller ones, over a number of months, without having to pay interest. 

Any catches?

The main catch with the Tesco Clubcard Credit Card with No Balance Transfer Fee is that it is not market-leading in terms of its interest-free period. So you'll need to be sure you can pay off your balance in 12 months. If you don't, your remaining debt will be charged at a representative APR of 16.9% (variable).

And if are looking solely for a card which offers 0% on purchases, Tesco's 12-month offering on this card can be beaten by the Halifax Purchase credit card which offers 17 months' interest-free on purchases.

Finally, bear in mind that card deals like this one tend to be reserved for those with a top-notch credit score. To check yours, head over to our credit monitoring channel and apply for a copy of your credit report.

What's the verdict?

Providing you are able to clear your debt within the 12-month 0% window, the Tesco credit card is the cheapest way of helping you to tackle your debt head-on.

However, if you are likely to need longer than 12 months but don't want to fork out a hefty transfer fee, there are some compromises.
The Halifax Online All in One credit card, for example, charges a low fee of 1% (£30 on a debt of £3,000) and offers 15 months 0% on both balance transfers and purchases.

Alternatively, the Lloyds Platinum 21 Month Balance Transfer card has a slightly higher fee of 1.5% (£45 on a debt of £3,000) but offers an impressive 21 months' interest-free on balance transfers.

Top tip!

There is another way to avoid paying a transfer fee on your credit card debt, and that's by using a low APR credit card. Many of these cards don't charge a balance transfer fee and, although you will incur interest, the APR is far lower than the average of 17.32%. It's also charged for the life of the debt - this means there is no deadline by which you need to have paid off your credit card debt in full.

For example, the Sainsbury's Nectar Low Rate Credit Card offers Nectar card holders a representative APR of 7.8% (variable) on both balance transfers and purchases. Plus you will also collect Nectar points as you shop.

The Sainsbury's Cashback Low Rate Credit Card offers the same representative APR of 7.8% on balance transfers and purchases, but instead of earning Nectar points, you'll earn cashback.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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