£1,000 for 62p a month? What's the catch?

Thanks to a half-price sale you can now borrow money - or transfer money you've already borrowed - at a cost of just 62p a month interest per £1,000.

What's going on? Well, Barclaycard has made a land-grab for the credit card market and halved the fees it charges for 0% balance transfers.

As a result, Barclaycard has the UK's two best 0% deals. However, this special offer ends on August 9th, so you'll need to move quickly to take advantage.

But if you think that sounds too good to be true, you might be right. Because if you don't pay off the money within 21 or 22 months (depending on the deal), you're charged 17.9% interest on the remaining balance.

Pay no interest with 0% balance transfers

Although the Bank of England's base rate has been firmly stuck at 0.5% a year since March 2009, the cost of borrowing on credit cards continues to creep up. If you spend on your plastic and don't repay your balance in full every month, then you'll pay steep rates of interest on this debt.

Right now, the average yearly interest rate charged by credit cards is around 18% APR. This means that a typical credit charge will charge interest of £180 a year on a flat balance of £1,000. This is an extremely expensive way to borrow money, especially in the long term.

This is where 0% balance transfer cards can save you a fortune. By transferring your existing card balance(s) to a 0% deal, you can avoid paying any interest on these debts for an extended period. In fact, the longest 0% periods currently on the market lasts for 23 months, giving you nearly two years of interest-free credit.

Don't forget the fee

However, there is a catch, as all 0% balance transfers charge you a fee for moving your existing balances to them. Typically, this fee is 3% of the sum transferred, which comes to £30 for every £1,000 shifted across.

Therefore, when weighing up 0% balance transfers, you must check two things:

1. How long the 0% offer lasts (the longer, the better).

2. How much the fee is (the lower, the better).

In short, before grabbing the latest 0% deal, be sure to check both of these features.

The best balance transfer deals

To save you the hassle of shopping around, I've already crunched the numbers for you. I've ranked these five Best Buys from best to worst:

Card	0% deal	Transfer fee	Purchase rate	Notes
Barclaycard 21 Mth Platinum Visa	21 months	1.3%* Min: £7.25	17.9% APR	Transfer fee halved until August 9th.
Barclaycard 22 Mth Platinum Visa	22 months	1.45%* Min: £7.25	17.9% APR	Transfer fee halved until August 9th.
HSBC Visa	23 months	3.3% Min: £5	17.9% APR	The UK's longest 0% transfer
Natwest Platinum MasterCard	22 months	3.2% Min: £5	17.9% APR
Halifax MasterCard	22 months	3.5%	17.9% APR	Minimum income of £20,000 a year

*Half of your transfer fee will be refunded within 28 days of transfers being processed. Offer valid only for new Barclaycard customers.

Given the strong similarities between these deals, you can see how fierce the competition for balance transfers is. All five cards have a standard purchase rate of 17.9%, while all five balance transfers last from 21 to 23 months.

Nevertheless, the two Barclaycard deals are the clear winners, even though HSBC's 0% deal is longer at 23 months. This is because both Barclaycards charge a transfer fee of either 1.3% or 1.45% until 9th August (after which the fee doubles to the original leve). In contrast, HSBC's transfer fee is 3.3%, NatWest's is 3.2% and Halifax's is 3.5%.

Why Barclaycard is the winner

To see how much cheaper the two Barclaycard deals are, take a look at the table below. This shows the fee payable on each £1,000 transferred, plus the monthly cost of this fee when spread over the life of each 0% deal:

Card	Fee per £1,000	No. of months	Fee per month
Barclaycard 21 Mth Platinum Visa	£13	21	62p
Barclaycard 22 Mth Platinum Visa	£14.50	22	66p
HSBC Visa	£33.00	23	£1.43
Natwest Platinum MasterCard	£32.00	22	£1.45
Halifax MasterCard	£35.00	22	£1.59

As you can see, Barclaycard's 21-month deal is the cheapest by far. It works out to a monthly fee of 62p to transfer £1,000 and enjoy 21 months of interest-free credit. In second place is the 22-month Barclaycard, costing 66p a month.

All three remaining deals are at least twice as expensive as the Barclaycard deals, thanks to transfer fees of £1.43 a month at HSBC, £1.45 at NatWest and £1.59 a month at Halifax.

So there’s no question: Barclaycard is the balance transfer winner this summer. Just make sure you take advantage of this fantastic special offer before the August 9th deadline.

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The credit cards that offer 0% interest and rewards