Are you excluded from the top credit card offers?

2nd February 2012  

This time of year traditionally brings a plethora of 0% balance transfer deals from the major credit card providers. It’s a smart way to manage an outstanding debt and ensure that you’re not just paying a fortune in interest rates and making no inroads into your actual debt. But there’s a sting in the tail for some consumers who could find themselves locked out of the choicest credit card deals.

The reason? Many of the most tempting offers, such as those from Virgin Money and MBNA, whilst they appear to come from different brands, are actually issued and underwritten by the same provider. So if you already have a Virgin Money card and want to transfer the balance over to a tempting MBNA card, you can’t because you’re considered to be an existing customer.

It’s a catch-22 situation that makes the usual ‘balance transfer shuffle’ more of a stumble, and could mean that you miss out on some very tasty transfer deals. Similarly cards issued by Lloyds TSB, are now all part of the same group as the Halifax Bank of Scotland, the new Lloyds Banking Group so if you have a credit card with any of these you would be excluded from balance transfer promotions from any other institution in the group.

NatWest, Coutts & Co and Royal Bank of Scotland (RBS) are also similarly linked.

If a credit card excludes balance transfers from other credit cards from within related or affiliated companies, we always try and mention it in our comparison tables.

But what’s worse about this situation is the knock-on effect it could have on your financial position and your credit status. Michelle Slade, spokesman for Moneyfacts explained how it could actually impact on your credit rating if you get rejected.

Michelle said

“Customers should check they don’t already have a card from the same parent group as if they are rejected, the negative mark on their credit file could affect them getting another card elsewhere.”

So not only could you be missing out on a great deal, but a rejection based on the fact that you are already an existing customer could actually make it more difficult for you to get an alternative deal elsewhere, locking you in even tighter to your original, interest-heavy credit card.

The credit card lottery

With so many offers on the table, it can be a bit of a lottery choosing the right deal. Fat, 22-month interest-free periods may seem tempting at first, but beware the hidden small print. You have to have a pristine credit rating to take advantage of such a juicy offer, and the balance transfer fees could be a nasty shock to your bank account too. There’s also the matter of how much of your outstanding debt you can actually transfer – most of these 0% offers only allow you to transfer up to 90% or 95% of your credit limit.

So think carefully before you choose an offer that would max out your limit in one go – you’ll could be turned down which will once again put a negative mark on your credit rating. Of course you never know when you apply for  a new credit card what credit limit if any you’ll be offered if you’re accepted.

The (credit) cards are also stacked in the lender’s favour, so watch out for ‘too good to be true’ deals. Lenders only have to give 51% of their customers the advertised rate to comply with Consumer Credit Directive legislation, which means you could be staring down the barrel of a big APR at the end of your 0% period.

As always, the advice is to shop around and compare credit cards before you switch. Do your research to ensure that your prospective 0% balance transfer card isn’t part of your existing card’s parent Group. While this may seem unfair to many, the simple fact is that it’s a lender’s market out there, and you may have to jump through a few fiscal hoops to get the best deal.

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