Balance transfer credit cards can seem amazingly generous because they allow you to shift over existing card debt and pay zero interest on it up to three years.
This can be a lifeline if your monthly credit card repayments are getting out of control, allowing you to regain control of your finances.
However, you need to handle balance transfer cards carefully, otherwise you could make your money problems even worse.
How do credit card balance transfers work?
The UK has a thriving market in balance transfer credit cards and there are dozens to choose from, with differing benefits.
Some card issuers simply offer the longest possible balance transfer period, such as the Tesco Bank Balance Transfer Credit Card, which charges no interest for the first 36 months.
Others combine an interest-free balance transfer card with the benefits of 0% purchase credit cards, giving you the best of both worlds.
For example, the MNBA All Round 30/30 Credit Card charges no interest for 30 months on both balance transfers and new purchases.
This makes it a leading combined balance transfer credit card and 0% purchase credit card, but if you take a little time to compare credit cards then you’ll find others.
Beware hidden fees
A word of warning: there is no guarantee you will qualify for a market-leading deal, as it will depend on your credit record.
If you have had prior money problems then you may be offered a shorter introductory rate on some cards, or may even be rejected altogether.
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You may also have to pay a fee for taking out a card, typically between 1.5% and 3.5% of the balance you transfer. So that could cost you as much as £35 for each £1,000.
If that worries you, some cards have zero fees, including Santander Everyday, which offers zero interest balance transfers for 27 months.
Again, shop around for the best credit card deals.
Pay it down
If you use your balance transfer card as an excuse to go on another spending spree, you are simply storing up trouble as the debt will still have to be repaid at some point.
So make a note of when your introductory rate expires and aim to pay off the debt before then, or make plans to roll it onto another 0% card.
However, do not assume you can keep rolling your debt over, if your credit rating has changed you may struggle to get a new card.
Also, beware using your balance transfer card for new spending. Unless it offers 0% on purchases, you will be charged the card’s full APR right way, usually a pricey 19.9%.
You also have to make at least the minimum card repayment every single month, otherwise your 0% deal will stop immediately, and you will start racking up interest on your full balance right away.
Slip-ups like that will also impair your credit record, making it hard for you to switch to another 0% deal.
This is a great opportunity to solve your debt problems, provided you strike the right balance.
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