Tempting 0% credit cards: are you sure you'll be accepted?

Credit card providers receive more applications for balance transfer deals in the New Year than at any other time.

Banks know that every January millions of customers, who have resolved to reorganise their finances, will be frantically searching for a cheaper way to repay expensive Christmas debt.

The good news is that as providers compete for the extra business at this time of year, a whole host of very appealing credit card offers usually flood the market – such as the newly relaunched Barclaycard which offers customers a two year interest free period when they move over an existing balance.

Before you jump on the balance transfer bandwagon, however, you should know that only half of people who apply for a credit card are successful, according to research by the UK Cards Association. This figure is based on research between January and October 2009, but is unlikely to have changed since then, a spokesperson said.  

What’s more, as of last year, lenders only have to offer their advertised rate to 51% of successful applicants – down from the previous requirement of 66%.

This means that providers could offer almost half of their new customers a worse deal – a more expensive interest rate, shorter 0% term or lower credit limit – than the one they applied for.

‘It depends on the lender. If a lender is looking to recruit customers and grow its books you may find you have a better shot,’ said James Jones of credit reference agency Experian.

‘However, lenders are generally cautious right now,’ he stressed. ‘We’re not told the success of applications, but we know from those who approach us looking to review their credit history that there is still a significant amount of people struggling to get credit’.

Check your credit rating

Only those with pristine credit histories stand a chance at getting their hands on the very best deals.

It’s crucial, therefore, that you review your credit history before applying for a new credit card.

‘Be realistic and avoid wasted credit applications,’ Jones said.

‘Make lots applications in a short space of time and you’ll end up making matters worse,’ he warned.

This is because, while your credit report does not show if you have been refused credit, it will show you have applied. Make too many applications in quick succession and you’ll paint a picture of desperation, so do your homework first.

You can access your credit report online via the three main credit rating agencies – Experian, Equifax and Callcredit – for as little as £2. But what should you be looking for?

The odd late payment over the years shouldn’t be an issue but regularly missing payments will damage your credit score, Jones said.

Make sure you’re on the electoral roll, remove any financial links to ex-partners and remember that lenders look at what credit you have available as well as how much you owe so cancel any cards you don’t plan to use, Jones added.

Remember that credit scores are essentially a ranking system – there has to be a cut-off point somewhere and in recent years this is much higher up than it used to be, Jones explained.

The best 0% deals

According to Moneyfacts, these are the top 0% balance transfer deals on the market.

However, while these eight offer the longest 0% deal, if you can pay off your debt more quickly then you may be better off opting for one of the many shorter deals also available if it offers a cheaper balance transfer fee.

Some companies, such as Experian and Moneysupermarket, offer to help match people's credit score with an appropriate card.

The result won't be 100% accurate but it will give you an idea of whether you will be accepted for a card without having to formally apply. Remember, that if you’re applying for a card with a bank you already have a history with that they will take this information into account as well as the details on your application form.

Be careful to read any small print carefully before you apply. Most providers, for example, will not allow you to apply for a balance transfer card if you are already an existing customer.

Barclaycard meanwhile will not allow you to change your payment due date, and Halifax warns that in order to keep your promotional rate you must make the minimum payment each month – miss a payment and you risk losing your 0% deal.

Finally, be aware that when your 0% offer expires you will have to start paying interest on your balance at the provider's standard rate – shown in the table above. In this case you may find a long term low rate deal is more appropriate for you.