What’s the best deal to pay off those Christmas credit card bills?

Powered by Guardian.co.ukThis article titled “What’s the best deal to pay off those Christmas credit card bills?” was written by Harriet Meyer, for The Observer on Sunday 3rd January 2016 07.01 UTC

Consumers saddled with credit card debt built up over the festive period are being targeted by an array of balance transfer deals offering 0% interest for more than three years.

Halifax and Sainsbury’s Bank were among those to launch their “longest ever” interest-free deals last week, just in time for the first round of post-Christmas bills to hit doormats.

Providers claim these 0% cards can save consumers hundreds of pounds in interest payments by transferring balances from a card with a high rate. However, they are only useful if you repay what you owe before the interest- free period ends. You pay a percentage fee on the balance to switch, but then you can pay just the minimum due each month and get a grip on your debt without worrying about it growing.

Halifax is offering a deal at 0% for 38 months with a 2.75% transfer fee. Sainsbury’s is offering 0% interest on balance transfer for 37 months, with a three-month interest-free period on purchases and a 2.89% fee. Customers can also earn Nectar points.

After the deal ends, borrowers pay interest at the card’s standard rate, currently 18.9% for both cards.

However, these cards have not succeeded in taking the best-buy spot. There are cards with longer interest-free periods on the market, with MBNA launching a 39-month one just before Christmas. This is the longest balance transfer deal and has a fee starting at 2.98%. After the interest-free period ends rates rise to MBNA’s standard, at 20.9% for balance transfers and 22.9% on other debts. To access the most attractive deals you will often need a clean credit rating.

A borrower with £2,000 on a credit card at 18.9% would pay £32.10 a month, saving a whopping £1,192.30 over 39 months on an interest-free deal. This includes a one-off 2.98% balance transfer fee of £59.60.

Andrew Hagger from MoneyComms says: “January is often the busiest month for switching as people look to rejig their borrowing following the Christmas excesses.” He adds that the average 0% balance transfer term now stands at a record 22.5 months, up from 17.3 months two years ago: “The fact that card companies still seem to be able to make these 0% deals work is in no doubt due in part to the number of people who ‘fall off the wagon’ by missing a payment or exceeding their limit and suddenly find themselves paying interest at 18.9% or more.”

There are plenty of cards on the market offering 0% interest on these debt switches for a set period. Santander’s 123 credit card will give you 23 months of 0% on balance transfers and purchases with no fee at all, with the added advantage of cashback on spending.

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