Barclaycard has recently announced it will be waiving interest charges on its credit cards with a 0% balance transfer or other 0% promotional deal. What does this mean for you as a customer?
The changes will come into force on 1 August, and will affect the bank's existing credit card customers with a 0% balance transfer, or another promotional offer including 0% money transfers and 0% purchases.
Which? has looked into what the changes are, how you'll be affected and what to look out for.
Some credit cards will offer a promotional 0% deal on balance transfers, new purchases ormoney transfers.
The 0% promotional period lasts for a set amount of time and crucially for a certain type of transactions before interest kicks in.
So for a 0% balance transfer card, for example, there'll be set time period where the bank won't charge any interest - but it only counts when you transfer a balance from an existing credit card.
Crucially, if you spend on this kind of card and there's no 0% purchase promotion, you'll be charged interest on the whole balance unless you pay it off fully, including the amount you transferred, at the end of the month - essentially losing the 0% balance transfer perk.
Similarly, if you have a 0%-purchase-deal card and decide to transfer the balance from another card, you'll also be charged interest unless you clear the entire balance at the end of the month.
So, it's important to check what does and doesn't attract interest on any card you have. Just because it's billed as being 0%, it doesn't mean you'll get 0% on all types of transactions.
If you have a Barclaycard with a 0% promotion, it will no longer charge you interest on transactions made outside the scope of this promotion with that card, as long as you pay off what you spend at the end of the month.
Say you transfer £1,000 in debt to a 0% balance transfer credit card. This amount will remain interest-free for the stated amount of time. But if you buy £100 worth of purchases, these will also remain interest-free if you pay off the £100 at the end of the month.
Under the old rules, you would have had to pay off the combined £1,100 to avoid being charged interest, as the purchases essentially invalidated the 0%-balance-transfer offer.
However, there's a catch. If you don't pay off the 'full balance' on your new purchase (say, for example, you only repaid £90 out of the £100) the new exemption won't apply and you'll be charged as per the old rules.
Likewise, if you have a credit card with a 0%-purchase promotion, you'll no longer be charged interest if you transfer a balance from another card, as long as you pay off the transferred balance at the end of the month.
The bank says the change is in response to a survey that revealed 29% of Brits don't understand how interest is charged on cards with 0% balance transfers and purchase deals. This misunderstanding could be the cause of many people being lumbered with unintentional interest payments.
The survey also found that over 50% of consumers have multiple credit cards, and over a third of those people would prefer to reduce that number, ideally using one for all transactions.
A number of credit cards already offer more than one service, such as 0%-balance transfers and 0%-purchase deals.
As an example, offers 0% on balance transfers (with no fee) and 0% on purchases for 30 months, along with 0.5% cashback on all purchases with no limits or caps, no foreign transaction fee on purchases or cash withdrawals when you're abroad.
However, there's an annual card fee of £36 to take into account, and if you stick with the card after the 30 month period is over, you'll be faced with a high 21.7% APR.
With all promotional rate credit cards you should make a note of when the 0% purchase, balance transfer or money transfer offer ends and ensure you have a plan to repay what you owe before interest kicks in.
The credit card market has seen various changes over the past few years, which have aimed to make things more understandable and transparent for consumers.
In 2015, RBS and NatWest announced they would no longer be offering promotional 'teaser' rates, as they can skew rates advertised on comparison websites, and customers were often caught out if they forgot to move to a new account once the favourable rate ended.
If you're concerned about your credit card debt, it can be worth notifying your provider. They may be able to work out a payment plan.
Always make at least the minimum payment on a credit card, but keep in mind that you may need to pay more to clear your debt.
If you switch to a 0%-balance-transfer deal, make a note of when the interest-free period ends. Your aim should be to pay off the card before this point, or you could be hit with high interest.
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.