A balance transfer card can help you bring your debts together and pay less interest, but only if you choose wisely and keep an eye on the offer period. Be aware, some cards may have charge a fee for transfering balances. Let me show you how to walk the path to balance transfer happiness.
Research shows that the average Brit spends more than £300 each Christmas on gifts alone. By jingo! most of these purchases are made using credit cards, leading to an unholy mountain of debt if not properly managed.
Balance transfer cards allow you to move existing debts or multiple debts to a new card so you can benefit from lower interest rates – brilliant! A small fee usually has to be paid when taking out this type of card (usually a percentage of the total amount you want to transfer). In most cases, you’ll get a nice little introductory interest-free period.
It’s important to make sure you choose the most appropriate balance transfer card deal for your circumstances. It’s good karma to consider how long it will take to pay off the full debt. If you choose a low fee card, you will usually be offered a balance transfer fee of about 1.5% or even less. Beware though – these cards generally have a shorter interest-free period, so you might end up paying high interest rates on whatever debt you haven’t paid off when the period is over.
It’s a wise move to take the time to work out how much you can realistically pay off each month and how long you’ll need to clear the debt. You can then use this knowledge to make an enlightened decision based on the interest-free period that the card offers, rather than the upfront fee.
Your aim should always be to clear your debt. If you’re only scraping by and making the minimum payments each month, then it’s going to be difficult to pay off your full balance before the end of your low-interest period.
While it’s tempting to keep switching to a new card with a 0% offer, this isn’t a great idea, as you may not always be able to find the best deals. The wisest choice may be to go for the card with the longest 0% interest period to give yourself time to pay off your debt in full.
So, if you’re confident you’ll be able to pay off your debt within the interest-free period, then a balance transfer credit card can be a good path to a debt-free existence. But if you think it’ll take you longer than the interest-free period to pay off your debt, you might be better off going for a credit card with low interest as standard, because the interest usually shoots up after the offer period ends. Try comparing credit cards and find which deals may best suit your circumstances.
1. Most balance transfer cards offer a better interest rate for a limited period and once this finishes, rates can levitate severely. Make sure you check the final rate is the best you can get.
2. You may have been offered 0% on balance transfers, but beware – normal interest rates will still apply on purchases made. It’s always best to check terms and conditions.
3. Often card providers will try and sell additional services with credit cards such as fraud protection and lost card services. Make sure you check what you’re signing up to as, because often these benefits aren’t worth it, my friend.
4. Your card will have a transfer limit, so you’ll need to transfer an amount that’s within the credit limit on your new card (minus the fee).
5. Your eligibility depends on your credit score. Any failed applications made may affect your credit score going forward and make it less likely for you to be able to get your hands on the cheapest deals in the future.
6. Providers advertise amazing deals but only 51% of accepted applicants have to have received the advertised that rate – with a poor credit score you might find yourself as part of the 49% which may mean a higher rate. It’s always advisable to check your credit score and to know exactly how it affects your borrowing.
7. Always shop around and compare deals to make sure you find the best balance transfer card for your circumstances
Peace and loans,