Each year millions of people waste money paying high interest rates on credit card balances. Balance transfer cards offer a low cost way of servicing credit card debt, but they have drawbacks which can make them costly. Life of balance credit cards are an alternative way of taking control of balances as they offer a fixed interest rate until the transferred balance is cleared in full.
Although rates as low as zero percent are available on traditional balance transfer cards, they are only offered for a promotional period before reverting to the standard variable rate. Those who would find it impossible to clear the balance within the allocated promotional period either end up paying a high variable interest rate or become rate tarts chasing the next available promotional offer. Additionally there is usually a fee involved in order to transition the initial balance. Those who choose to rate tart will be charged a fee each time they swap cards, as well creating a negative impact on their credit score.
Life of balance credit cards preclude the necessity of continually chasing the next best deal. An assigned fixed interest rate is levied on the full transferred balance and applies until it is paid off in full. Transfer fees are low though generally a higher APR is applied to purchases. The three best life of balance credit cards each offer something slightly different to appeal to consumers, but none offer zero percent promotional rates.
Egg’s Money World MasterCard has the highest fixed rate of 8.9%, but there is no balance transfer fee. The APR for purchases ranges between 19 – 24%, dependent on the applicants credit. The Egg card has a monthly fee of £1 but offers 1% cash back on purchases, up to a maximum of £200 per annum.
The MBNA rate for life card offers a lower balance transfer APR of 5.9% for the life of the balance, but charges a balance transfer fee of 1.5% for those who initiate transfers within the first 60 days. Thereafter the balance transfer fee rises to 3%. The variable APR for purchases ranges between 16.9 – 24.9% dependent on credit. The MBNA card does have the advantage of offering money transfers for the same low APR of 5.9% for the life of the money transfer, making it an extremely competitive rate for what is effectively an unsecured loan.
The Barclaycard Platinum Simplicity credit card offers the overall best deal although it does not offer money transfers. However the 6.8% APR applies to both life of balance transfers and purchases. There is no balance transfer fee to pay, but applicants do need to have an annual income of £20,000.
Card users who elect to simply use life of balance credit cards to pay off an existing balance and do not plan to use the card for purchases are best served by the MBNA rate of life card, providing the balance transfer fee does not exceed the saving on the interest rate. Those who intend to use the card for purchases as well as balance transfers will find the Barclaycard Platinum Simplicity card the best choice. Those seeking a low cost loan should give consideration to the MBNA money transfer offer.
Sources: mbna.co.uk
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