No such thing as a fee free credit card

If youre a true rate tart Abbey's recently launched Zero credit card won't have escaped your attention. There is no balance transfer fee, no interest on new purchases, no cash advance fee and no foreign exchange fees for six months.

You know the old saying, "If it sounds too good to be true it probably is," but on the face of it, this new card is a show stopper.

The bank recently took its credit card business in-house from the care of MBNA and it said that this has enabled it to throw down the gauntlet to the rest of the industry and be more innovative. Abbey said that its ambition is to "think differently" and it plans to bring out other innovative cards later in the year.

Not the only one?

But on closer inspection, Abbey's card isn't quite as innovative as the bank wants you to think. Abbey's offer of no fee on balance transfers isn't the only one. Norwich & Peterborough Building Society offers six-month 0% balance transfer period with no fee while Britannia Building Society offers platinum and classic Visa cards with no transfer fee for five months.

Other cards on the market also offer longer periods of zero interest for purchases than Abbey's six months. HSBC will give you 0% for 12 months and Halifax All in One Mastercard gives 10 months.

Can you save money by switching to another credit card? Find out with Moneyextra's comparison service.

High interest rates

The sting with Abbey's card comes after the six-month offer period. Take a balance beyond this period and it's a Zero card in name only. Interest on purchases goes up to 18.9% APR and interest on cash advances goes up to 25.9% APR, which are high rates against other credit cards in the market.

With the purchase rate of 18.9% there is a grace period of 56 days before interest starts clocking up but when withdrawing cash, the interest rate starts from the first day of withdrawal.

Interest rates on credit cards have been going up - credit generally has been getting more expensive, thank the crunch, and credit card rates in particular have risen on average since fees were forced down. Nevertheless, using the Zero card to access cash could become extremely costly.

How do you use your credit card?

Before you get taken in by the latest dazzling offer, you really need to think about how you use your card. There is no point in have free foreign transactions, if you don't go abroad.

If you pay off the balance regularly each month, look for rewards or a cashback. If you don't, the only things to look out for are the 0% deal and the go-to interest rate.

Are you looking for 0% balance transfer cards?

Hey big spender?

If you have a large balance to pay off or plan to buy a big ticket item, youll probably need a longer 0% introductory period. You can get as much as 15 months 0% interest on balance transfers from Virgin Money, 14 months from the Barclaycard OnePlus card and 13 months from NatWest and Royal Bank of Scotland.

The offer starts from the date the card is issued, so you need to make sure you transfer funds as soon as possible.

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Karen Beavis
29 April 2008 © Moneyextra.com

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