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Beware no-benefit credit card transfer deals

Barclaycard interest-free deal offers no benefit

Red-coloured credit card

Some 0% balance transfer credit card deals offer no better value than just spending on your card

Promotional 0% balance transfer credit card deals for some existing customers could offer no better value than just spending on the card at your standard rate.

A Which? Money researcher was recently sent an interest-free deal by his credit card provider, Barclaycard. It offered him a 0% balance transfer deal of six months. However, the deal comes with a balance transfer fee of 4.9%, despite Barclaycard offering new customers a more attractive 22 months interest-free with a lower fee of 2.9%.

0% credit card deal costs same as standard-rate purchases

If our researcher transferred £1,000 to his card, he’d face £49 in transfer fees. If he wanted to repay the balance over the 6-month promotional period, his monthly repayments would be around £175, equivalent to an APR of about 17.9% – the same as the standard purchase rate on his card. The 0% deal offers no better value than just spending on the card at 17.9%.

Early repayment pushes interest rate even higher

If you pay off the transferred balance early, the effective APR goes up even further. You would still have paid the 4.9% balance transfer fee up front, but would have had the 0% deal for a shorter period. And if you take longer than six months to repay the balance, you’ll start paying interest on the outstanding balance.

A spokesman for Barclays told us: ‘While the scenario… outlined is possible, the majority of customers actually choose to maximize their benefit from this offer by using their 0% promotional period to the full extent possible. Customers can enjoy savings of up to £40 for every £1000 of balances transferred under this offer over six months.

‘As always, the benefits customers receive from balance transfer deals are dependent on their current circumstances and to make the most of any balance transfer deal customers should calculate the costs of taking a proposed offer and compare them against their current borrowing costs.’

A new credit card could offer better value

Which? credit card expert Dan Moore says: ‘If your existing credit card provider sends you a promotional balance transfer deal, make sure you carefully check the fees you’ll have to pay. You could even be worse off by switching.

‘If you’re paying a high interest rate on a credit card, you’d probably be better off applying for a new Best Rate balance transfer card, rather than switching the balance to another card you already hold.’

More on this…

  • Which? Best Rate credit cards – we help to find the credit card for your needs
  • Credit card Which? Recommended Providers – the best providers for service and value
  • Which? Money Helpline – call our Helpline if you have any card queries
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