Is it better to choose a credit card with a long 0% balance transfer offer or one with a low rate that starts low and stays low?

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Credit cards work well as convenience items making it easy to pay for goods and services in today’s world. By clearing the full credit card balance each month cardholders will gain the maximum benefit and not line the pockets of (formerly) bloated financial institutions with interest charged.

Modern culture has created a ‘buy now, pay later’ attitude to money which has led to many people leaving outstanding balances on their credit cards for prolonged periods of time.

By transferring balances onto other cards with 0% offers the cardholder can save hundreds of pounds in interest payments and still reduce the debt through only paying the minimum amount each month.

However if the cardholder doesn’t keep doing this at the end of every offer period the rate will revert to the card issuers standard APR which could be between 14.9% and 34.9% depending on the issuer.

It may actually be beneficial to switch to a card with a fixed low rate APR instead of one with a 0% balance transfer offer if, after the offer period, the cardholder leaves the balance were it is.

By using this EXCEL spreadsheet credit card repayment calculator (with amortization) it is possible to work out which scenario is better.

Using a 0% offer with 12 months and a balance of £3000, after 12 months the balance would be £2019.08 then, using the Moneysavingexpert card calculator and a typical APR of 14.9%, it will take 14 years 10 months to repay and cost £1220 in interest if only the minimum amount is repaid each month.

Compare this to the current leading fixed rate credit card Barclaycard Simplicity (according to Moneysupermarket) with a 6.8% APR then a £3000 balance being repaid with the minimum amount each month will take 12 years 10 months and only cost £654 in interest.

Of course if the cardholder switches every time the 0% offer expires (using 12 month examples) it will take 8 years 10 months to repay the debt and not cost a penny in interest. But with 3% transfer fees every year it would still cost £188.61 and of course time.

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