0% vs no fee balance transfer cards

julia kukiewicz
By Julia Kukiewicz

visa debit cards

No upfront fees have made life of balance cards a popular choice amongst those wishing to move and pay off credit card debt.

Yet these cards charge interest that can soon mount up, even if the rate is much lower than those offered by other credit cards.

It seems that in many scenarios, 0% interest cards may still be a better option despite their upfront transfer fees. We present three of them in this article.

But first, let's take a look at some current deals for both cards to see how they compare:

0% balance transfer cards

Balance TransferTransfer Fee
santander all in oneSantander All in One0% for 43 months
0%
Representative example: When you spend £1,200 at a purchase rate of 15.9% p.a. (variable), with a £36 annual fee, your representative APR will be 21.7% APR (variable).
barclaycard platinum 40 month balance transferBarclaycard Platinum 40 Month Balance Transfer0% for 40 months
1.68%
Representative example: When you spend £1,200 at a purchase rate of 19.9% p.a. (variable), your representative APR will be 19.9% APR (variable).
clubcard balance transferClubcard Balance Transfer0% for 40 months
2.69%
Representative example: When you spend £1,200 at a purchase rate of 18.94% p.a. (variable), your representative APR will be 18.9% APR (variable).

Life of balance cards

Balance TransferTransfer Fee
clear rate platinumClear Rate Platinum6.9% p.a. life of balance
No fee
Representative example: When you spend £1,200 at a purchase rate of 6.9% p.a. (variable), with a £24 annual fee, your representative APR will be 11.1% APR (variable).
royal bank of scotland clear rate platinumRoyal Bank of Scotland Clear Rate Platinum6.9% p.a. life of balance
No fee
Representative example: When you spend £1,200 at a purchase rate of 6.9% p.a. (variable), with a £24 annual fee, your representative APR will be 11.1% APR (variable).
bB9.9% p.a. life of balance
No fee
Representative example: When you spend £1,200 at a purchase rate of 9.9% p.a. (variable), your representative APR will be 9.9% APR (variable).

To see more deals for both 0% and life of balance transfer cards visit our main comparison table here.

It's worth noting that there are now some 0% interest cards that also wave transfer fees. Offering the best of both worlds, these cards are the obvious choice when available. However, they are less common and often only reserved for those with the best credit ratings.

When are 0% balance transfer cards best?

1. If it's going to take a long time to repay a balance

As can been seen in the first table above, cards offering 0% interest on balance transfers always specify a time that this introductory offer is valid for.

Usually, as long as the debt is paid off in the 0% interest period, the initial upfront cost of any balance transfer fee beats a no fee low interest card deal over longer periods of time.

For example, let's look at the total cost (that is, either the initial balance transfer fee or monthly interest payments) when a £3,000 credit card balance takes around 11 months to pay off in full.

£3,000 balance, paying £300 a month (11 months to repay)

Interest & fee 0%
2% fee
0%
2.5% fee
0%
3% fee
6.95% p.a.
No fee
7.9% p.a.
No fee
9.94% p.a.
No fee
Total cost £60 £75 £90 £97 £111 £139

However, it's a different story when we halve the amount of time to pay off the same debt.

£3,000 balance, paying £600 a month (6 months to repay)

Interest and fees 6.95% p.a.
No fee
7.9% p.a.
No fee
0%
2% fee
9.94% p.a.
No fee
0%
2.5% fee
0%
3% fee
Total cost £52 £59 £60 £74 £75 £90

In most cases here overall interest fees end up costing less than upfront balance transfer fees over a reduced period of time.

For this reason, monthly repayment budgets and the expected amount of time it will take to pay off a balance must be key considerations when choosing a card deal.

2. If the balance is repaid within the 0% period

As we noted, the examples above expect the best from a 0% balance transfer deal: they anticipate that the cardholder will take the deal, move their balance and then pay it off in full within that 0% period, meaning that their only outgoing has been that initial fee.

Unfortunately, that's not always the case.

Let's say a cardholder moves £5,000 to a card offering a 0% introductory rate for 12 months but they're only able to make minimum repayments on the debt most of the time and, when the introductory rate expires they've still got a £4,000 debt.

Now they're landed with an interest rate that might be even higher than the one they moved from.

If the interest rate was 19% p.a. and the cardholder made a £200 payment every month from the end of the 0% deal on they'd pay £762 in interest for a year and it'd take 11 months to get it paid off in full.

A life of balance card could have done the job for much less.

3. If debt is getting you down

Finally, it's becoming increasingly clear that, when considering how to get out of debt, psychological reasoning counts.

It's no secret that debts can be a major strain on our lives.

They do much more than suck money from our pay packets, they suck our will to deal with our finances at all.

It often becomes more preferable to ignore a credit card debt, or leave it languishing at a low interest rate, than to take the extra budgeting time to ensure that it gets paid off in full.

However, having a set goal in mind - the end of that 0% period at which point the debt will be done and dusted - can be a mental boost.

The psychological benefits of resolving debts quickly and in full are also true in the case of multiple debts.

Advocates of the 'debt snowball' method, have demonstrated the positive effect of 'subgoal completion'. Here those paying off one commitment in full, even for small amounts, found it easier to deal with the next one and were more likely to rid themselves of debt in the long run than those who pursued the more conventional 'highest interest rate first' method.

Bad reasons for going for a 0% balance transfer

Having said all that, there are some very bad reasons floating around for going for a 0% deal over a no fee life of balance transfer.

Don't get caught out by some of the dodgy reasoning, which includes the following:

For more information on 0% interest cards visit this guide; learn more about life of balance cards by heading here; or see how these cards measure up against each other in our comparative guide.


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