If you’re becoming a slave to unmanageable credit card debts then a 0% balance transfer credit card could ease the burden. Switch your balance to a 0% card and save yourself from paying off the interest rather than the balance. Take a look at our guide where we examine these cards in more detail.
Balance transfer cards can be a great way to deal with credit card debt. They allow you to transfer your existing credit card debt to another card where, for a set period, you’ll not have to pay any interest. The current best buy is the Virgin Money Credit Card (www.virginmoney.com) which offers 0% balance transfer for a period of 15 months.
The transfer periods will differ between cards, with many of them only offering an interest free period of around 6 months. It’s important to shop around and make comparisons; be sure you’re getting the best deal. Here are some of our recommended suggestions:
Over recent times, credit card companies have got wise to the so called ‘card tarts’. These were customers who would jump from card to card, switching from one 0% interest offer to another. Most credit card companies now impose a fee to deter people from continually switching cards once the promotional period ends. These fees vary between cards; the majority of fees are around 3% of the total amount of the balance you intend to transfer.
How much will I pay?
These figures are based on the assumption that you’re transferring the UK’s average credit card debt, which has been calculated at £4578.
How much will I save, with a balance transfer card?
Here’s a summary of how much you could save (per year) paying the monthly minimum payment on a 0% balance transfer card, versus a card that’s set at the standard rate of interest. Again, we’ve assumed that the balance is £4578.
While credit card companies will dazzle you with enticing offers, it’s important to always remember that these are financial institutions and they need to cover themselves also.
Here are a few traps to avoid:
Make sure you clear your debt before the promotional period ends. If you can’t, then transfer any remaining balance to another 0% interest introductory deal (you’ll have another fee to pay though).
Balance transfer deals are often only open to new customers. Even though the cards may have a different name on them, if they are owned by the same bank or banking group you may not be able to switch between the two.
Watch out for a minimum monthly spend clause. If you fail to spend the minimum amount each month then you’ll be subject to standard interest rates.
Never use your credit card for cash withdrawals. Balance transfer card or not, you’ll be paying a hefty sum of interest for cash withdrawals
Don’t apply for too many credit cards, 0% balance or otherwise, in a short space of time. Having a long history of credit card applications on your credit file will have a negative impact upon your credit rating, particularly in this ‘credit crunch’ era. Read our guide to Understanding your credit score
If you’re tempted to continue spending having transferred your balance to a new card then immediately cut the card up. Self discipline is a vital ingredient in the clearing of outstanding balances.
