Life of balance cards vs. zero percent balance transfer cards

Balancing the books

Getting yourself out of a £25 billion hole can’t be easy, but as the Chancellor worries about whether he is going to have to balance the books following the government’s emergency loan to Northern Rock, many of us may be left scratching our heads at the somewhat smaller financial task of trying to work out which credit card to get next and asking ourselves what we should do with our existing debt.

According to the number of 0% introductory balance transfer cards has increased 13% in the last twelve months. These cards now account for 72.5% of the entire credit card market and while these cards are obviously extremely popular there are good reasons to consider an alternative.

10 months off

The 169 balance transfer cards available offer zero per cent interest for an average of 10 months. So if you have moved £3000 from another card this figure will not increase over this period unless you make additional purchases. Balance transfer cards however charge you a small fee, which is unlikely to be less than 2.5% meaning that the cost of setting up the card in this case will be £75.

This hit can be worth taking however as the APR on an average credit card is likely to be around 15% meaning that over a year you could end up owing £450 if you fail to make repayments.

Click here to compare zero per cent balance transfer cards.

A responsible alternative?

Balance transfer cards have been proving popular, but by taking one out it can be tempting to avoid paying off your existing debt. If it’s time to start clearing the debt then it might be worth considering a life of balance card. These cards do not offer an initial incentive but as a result the APRs you pay are much lower.

A competitive offer such as Barclaycard’s Life of Balance card has a rate of 5.9% and even on a less competitive deal the APR will typically be less than 9% which compares very favourably to the 15% you can expect when you come off an introductory rate on a balance transfer card. By taking on a lower rate your debt should become more manageable.

When considering a life of balance card it’s important to check that the APR is fixed indefinitely as some of the cards on the market only offer the reduced rate for a specific time. Marks & Spencer’s card for example offers an APR of 7.9% for 24 months before moving to 18.9%.

Click here to compare life of balance credit cards.

Cards galore

With hundreds of cards available on the market it’s very important to think about what sort of card you need before you start thinking about providers or APRs. On top of balance transfer cards and life of balance cards there are cash back cards and introductory purchase cards, both of which have their benefits.

If you’re looking to start clearing your credit card debts and are tired of continually switching between cards and having to cough up balance transfer fees however then a life of balance card could be the best bet.

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