06:41 25 July 2013
Consumers seeking a cheaper home for their credit card debt are being spoilt for choice as competition in the balance transfer market goes from strength to strength.
Virgin Money is the latest card provider to up its game after it increased the 0% window on its balance transfer credit card from 20 months to 26 months.
Here, we take a closer look at what it has to offer.
What's the deal?
Virgin Money's balance transfer credit card now offers 26 months interest-free on balances moved over to the card, up from the previous 20 months. Balances transferred attract a fee of 2.99%.
The improved offering from Virgin now means it shares the number two spot in the best buy tables with the NatWest/RBS Platinum credit cards. Both of these cards also offer 26 months at 0% on balance transfers, but they triumph slightly by offering a lower fee of 2.65%. (You can read more here.)
However, all three cards have yet to knock the Barclaycard Platinum Credit Card with Extended Balance Transfer from its market-leading position with its offer of 27 months' interest-free. The card comes with a higher transfer fee of 3.5%.
The move by Virgin Money means it's now offering its longest ever 0% deal. Yet it's not the first time Virgin Money has positioned itself high up in the best-buy tables. A few years ago, the card provider reigned supreme in the balance transfer market for many months. However, in 2010 it was knocked off its number one spot by (you've guessed it) Barclaycard.
Virgin's card also offers six months interest-free on purchases. And customers will also be able to take advantage of discounts such as 5% off Virgin holidays and 25% off Virgin Experiences.
Who's it good for?
The Virgin Money balance transfer card is ideal for anyone who has expensive credit card debt that's not already sitting on a card from Virgin or MBNA. This is because you can't transfer debt between cards from the same provider or group of providers and Virgin's cards are issued by MBNA.
The card is also a perfect choice for anyone who has debt on a Barclaycard and therefore can't shift it to the market-leading card.
The main catch with Virgin's offering is that it's not market-leading. It is, however, within sniffing distance of the top spot and don't forget that while it still comes with a transfer fee, at 2.99% this is far lower than Barclaycard's fee of 3.5%.
That said, the fee can be beaten further by the NatWest/RBS Platinum credit cards which also offer 26 months interest-free on balance transfers and have a fee of 2.65%.
As with all balance transfer cards, if you don't clear your balance before the 26 months are up, you'll be hit with a representative annual percentage rate (APR) of 17.9% with the Virgin card.
You'll also be charged this rate on new purchases made on the card after the initial six-month 0% period is up. But remember it's best not to use a balance transfer credit card for spending purposes - instead, apply for one that's specifically designed for purchases. You can compare this type of credit card here.
What's the verdict?
The Virgin Money credit card is a great offering for anyone looking to shelter their existing credit card debt from interest for more than two years. Although consumers can enjoy one month longer at 0% with Barclaycard, when you factor the fee into the equation, Virgin's credit card is still extremely competitive. To highlight this, our number crunchers have calculated the following example:
The average balanced transferred is £2,143, according to the British Banker's Association. So, if you were to shift the £2,143 onto the Barclaycard, you would pay £75 as a transfer fee. By contrast, it would cost you £64 with the Virgin credit card, a saving of £11.
But if you moved your debt over to the Virgin card and only paid the minimum monthly repayment, you wouldn't quite have cleared your debt by the time the 0% window expired. However, in the 27th month, the interest you'd fork out would only come to £14.42. Deducting the £11 you saved earlier from this means that overall you'll only have paid an extra £3.42 with the Virgin card.
Of course, if you pay off more than the minimum each month, you should clear your debt before the 0% window ends and pay no extra.
Some credit cards will allow you to avoid paying any transfer fees at all. But in return, you will usually have to pay interest - albeit at a lower rate than most credit cards charge.
For example, both the Sainsbury's Nectar Low Rate Credit Card and the Sainsbury's Cashback Low Rate Credit Card have no balance transfer fee, but offer a representative APR of 7.8% (variable) on balance transfers and purchases. You can read more about these cards in my article.
Alternatively, the Barclaycard Platinum Simplicity card has no transfer fee and offers a representative APR of 7.9% (variable) on both balance transfers and purchases.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct. We're free, independent and compare all UK credit cards, as well as offering exclusive deals you can't get anywhere else. Contact MoneySupermarket.com at Moneysupermarket House, St David's Park, Ewloe, Flintshire, CH5 3UZ. © Moneysupermarket.com Ltd 2013.
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