Recycled: the new 0% deals on plastic
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Your support makes all the difference.Rate tarts - borrowers who flit from one 0 per cent deal to the next to avoid paying interest - have fallen on hard times.
A succession of credit card providers have cut the interest-free balance transfer offers, or increased their associated fees, in order to curb their costs and tighten up on lending criteria.
But the tarts have been given some breathing space with HSBC's announcement of its own 0 per cent offer on balance transfers for up to 12 months. While this new, year-long interest-free deal may sound attractive, it comes with strings - a 2 per cent capped transfer fee.
Nick White from the price comparison service Uswitch.com warns it would be "rather expensive" to use this card for new purchases as well as transferred debt. This is because credit card providers will usually charge different rates of interest on transferred balances and new purchases.
Borrowers' repayments will be put towards paying off the cheaper debt first - usually the balance transfer. In the meantime, you rack up additional debt at a much higher rate with any new purchases.
Until a change in its policy last month, HSBC had been one of the few providers - along with Nationwide - to apply payments to the most expensive debts first. Now, says Mr White, customers could accrue interest on new purchases at an annual percentage rate of 15.9 (after just three months at 0 per cent), or 22.9 per cent on cash advances and cheques, until the outstanding balance transfer is paid in full. This, of course, would hit the savings made from having paid no interest on your balance transfer.
The most cost-effective way to manage your finances is to keep separate cards for transfers and new spending. Mr White recommends using an additional 0 per cent card just for new purchases, and picks out deals from GE Money (12 months interest free) and Sainsburys Bank (10 months).
Balance transfer fees - usually ranging from 2 to 3 per cent of the sum moved over - are now a common feature of many deals. Watch out for those that are uncapped, as they could be expensive.
Last month, the Halifax launched a new deal on its One card, offering 0 per cent interest on transfers and new purchases for nine months. But it increased its transfer fee to an uncapped 3 per cent - the highest on the market.
Virgin Money recently extended its transfer deal from nine to 12 months, with an uncapped 2 per cent fee.
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