Just nine balance transfer cards left

This time last year there were around 200 credit cards offering 0% balance-transfer deals. Now there is half that number, and of those only two dozen are genuine 0% balance-transfer cards.

Fool.co.uk believes that a genuine balance-transfer card must have a deal lasting at least 10 months if the card charges you a fee. And while a choice of two dozen cards may appear attractive, many of these providers are connected.

In other words, while two cards may have different brands, they could have the same card issuer. What this means is that credit-card providers will not allow a customer to get another card under its umbrella. Consequently, the number of balance-transfer cards can be whittled down to nine.

The nine genuine balance-transfer cards are:

Card issuer - Card provider
Abbey - Abbey
Bank of Ireland - Post Office
Barclaycard - Barclaycard
Citi - Citi/bmibaby
Egg - Egg
HBOS - Halifax/BoS
MBNA - Virgin
Nationwide - Nationwide
Royal Bank of Scotland - NatWest/RBS

However, it is important to understand that an upfront fee can be costlier than spreading interest payments over a year. A 3% upfront fee for a one-year deal comes to a yearly interest rate of 5.6% AER (Annual Equivalent Rate). For a six month deal, the 3% fee is the equivalent of 10.7% AER.

The pick of the crop are Abbey and Royal Bank of Scotland credit cards. Both providers charge a 2.5% upfront fee and 0% interest on balance transfers for 13 months. This equates to an annual interest rate of 4.3% AER.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “One area of lending that is still going strong is the 0% balance-transfer credit card. There are plenty of deals available, though not all deals are always what they appear to be.

“Consumers who intend to use 0% balance-transfer cards need to be aware that while there may be a plethora of cards, there are effectively only nine genuine cards that will do what they say on the tin.

“As always there are no free lunches in finance, and what appear to be free lunches normally come with strings attached.”