An estimated 17 million Brits bought their Christmas presents on a credit card last year, with 10 million putting their Christmas dinner on credit too.
Christmas 2014 could soon generate some hefty interest charges if it isn’t paid off, but these could easily be avoided with a balance transfer card.
Fierce competition in the balance transfer market now means that you could avoid interest on your card balance for almost three years – the longest it’s ever been.
How much could I save with a balance transfer card?
The average household 2014 Christmas spend was £821, according to YouGov. Over 35 months this could cost £542 in interest charges (if only the minimum £5 repayments were met on a typical credit card charging 18.9% APR).
How much your card balance will cost depends on how long it’s going to take you to pay it back. Balance transfer cards tend to trade off longer 0% interest periods against lower transfer fees: the shorter the 0% period, the lower the transfer fee.
If you think you could pay it off in a few months or under a year your debts could actually cost you nothing at all.
We’ve compared the cost of £821 in credit on four different balance transfer cards, as well the cost of keeping the balance on an old card charging 18.9% APR, over 35 months:
The longest 0% period ever
The Barclaycard Platinum 35 Month Balance Transfer Visa leads the market with the longest available 0% interest period for a balance transfer.
You can effectively defer paying any interest on your debts for almost three years.
However, there is a 2.49% fee to transfer your balance so transferring £821 would cost you around £20 in fees. After that, provided you meet the minimum monthly repayments, your debt will not cost you anything for 35 months.
MBNA everyday card: low fee, low interest
The MBNA everyday credit card is a solid all-rounder card, offering 21 months of 0% interest on balance transfers, as well as 15 months 0% interest on purchases.
The balance transfer fee is relatively low at 1.5% meaning it will cost £12 to transfer a balance of £821. The APR is also quite low at 15.9%, so it doesn’t shoot up too fast after the 0% period expires, costing you £153 over 35 months.
Santander 123: is the annual fee worth it?
Santander’s 123 Credit Card MasterCard is probably the most versatile card currently on the market.
It offers 23 months of 0% purchases and balance transfers with a 0% fee. The card also offers some of the most competitive cashback in increments of one, two and three percent depending on where you spend (hence the ‘123’ name).
The only catch is that these benefits come with a £24 annual fee, but this is waived if you have a 123 Current Account with Santander. This means any balance will cost you £48 over the course of 23 months until the 16.5%APR kicks in.
Over 35 months, a £821 balance will cost you £206, assuming the £5 repayments. But if your fee is waived, your balance transfer will be completely free for almost two years.
Tesco credit card: money for nothing?
The No Balance Transfer Fee Tesco Clubcard Credit Card is the only entirely “fee free” card available, but after twelve months the interest quickly shoots up to 18.9% APR. This means £821 could end up costing £307 over 35 months if you meet only the minimum repayments.
If you think you can pay off your balance in under a year this is the cheapest way to manage your debt. But if you can’t, it can soon become the most expensive.
Compare balance transfer cards
The consumer credit market is becoming increasingly competitive as we move into 2015, with cheaper cards and better deals rolled out at the end of last year and in January, so keep an eye open to check for great new card deals.
There are a lot of balance transfer cards available to suit a wide variety of circumstances, it’s well worth comparing all balance transfer cards to find the best balance transfer card for your needs.
To find out more you can read our guide on balance transfer cards.