13:58 05 December 2012
If you have existing credit card debt, the fact you can switch it to another card that offers 0% on balance transfers is pretty well documented. However, what if you are paying through the nose on a different form of debt instead, such as a store card, overdraft or personal loan?
This is where a credit card that allows money transfers as well as balance transfers can help. And, thankfully, MBNA has just launched its new Platinum card, which offers a whopping 22 months interest-free on both. Here we take a closer look.
What's the deal?
MBNA's new Platinum credit card offers 0% interest for 22 months on both balances transferred from another card and on money transfers. Money transfers are when borrowing you apply for is paid straight into your bank account from MBNA. You can then choose what you want to do with it, such as clear more expensive debts or even fund a major purchase such as a new car or kitchen.
There are fees though, as you would expect. To make a balance transfer from another card (which cannot be in the MBNA family), you will be charged 2.85% of the amount being transferred, but this rises to 4% for a money transfer.
The card also offers 0% interest on purchases for three months from the account being opened.
Michael Donald, MBNA's business development and marketing executive, said: "This new long-term balance transfer credit card is, by a clear two months, the longest we've ever offered in the UK, and we're delighted to be able to make it available for new customers in time for Christmas."
Don't get carried away before checking the small print though - as there are catches. For a money transfer - which is the card's main selling point - the 4% fee doesn't work out cheap. If £2,000 is applied to your current account, for example, it will cost you £80 for the privilege. So, while no interest will be charged for the first 22 months, you will still need to factor in this cost.
Another potential pitfall is that the annual percentage rates (APR) that the different kinds of debt 'land on' at the end of the 22-month 0% period are not consistent. If you make a balance transfer, the representative APR at the end of the 0% deal is 18.9% (variable) but if you make a money transfer it's higher at 20.9% (also variable).
Don't confuse this with the less punishing representative rate of 16.9% (variable) which applies to all purchases after the three-month 0% period.
What's the verdict?
If you are sure you can clear both money transfers and balance transfers within the allocated 22-month 0% period and you have done your sums on the cost of the respective fees, MBNA's Platinum card could be a good bet.
But there are alternatives to consider. The AA's Transfer Plus credit card, for example also permits money transfers and charges a lower fee of 2%. The same 2% fee also applies to balance transfers.
That said, once you have your hands on the money, there won't be any interest-free period. Instead the Transfer Plus card charges a low, manageable APR rate of 6.9% (variable) for as long as it takes you to clear the debt.
Whether this card or the MBNA makes the most sense, will depend on how much you want to borrow, the cost of the debt you are paying off with it - and how long you think you will need to clear the new debt too. Always do your sums first to find out.
It's worth noting that Sainsbury's Low Rate Credit Card, also charges a representative APR of 6.9% (variable) and doesn't charge a fee at all on balance transfers. But if you are looking for a money transfer, the card will be no good as it doesn't offer that facility.
Money transfer opportunities are a rarity among credit card providers, so they're bound to be eye-catching. But as well as factoring in the related fees, you'll need to be disciplined to get the cash to its rightful destination - such as paying off more expensive debt.
What's more, if you want the money transfer to pay for a large purchase, remember that, in practice, this will be coming out of your current account.
This means you will not benefit from the Consumer Credit Act which provides protection on spending between £100 and £30,000 made on a credit card. The Consumer Credit Directive tops up this protection to £60,620.
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