0 balance transfer credit cards are a type of interest free credit card which allow you to pay zero interest on your debt for a fixed period of time, meaning it can be a cheap way to pay off debts if you can navigate the system to your benefit. However, while these credit cards can be very useful in certain circumstances, if you’re not careful they could equally lose you money. Here are the dos and don’ts of 0 balance transfer cards.
DO: Compare offers
Different providers offer different terms on their 0 balance transfer credit cards. Shop around for longer interest free repayment periods, lower interest rates once the offer is over and lower transfer fees where possible. It might not seem important right now, since you will not be paying any interest at first, but these factors could save you hundreds of pounds later on if you find yourself unable to pay off the balance within the promotional interest free period.
DON’T: Ignore transfer fees
Transfer fees are now standard on the majority of 0 balance transfer cards. This is because providers want to avoid customers taking up the interest free offer, failing to pay off their debt within the promotional and simply switching card supplier each time the interest free offer expires. Balance transfer fees vary from card to card but are usually around 2.5 to 3 of the total balance owed. Look for the lowest balance transfer fees possible when comparing credit cards.
DO: Be realistic
Be completely honest with yourself about how long it will take you to pay off your debt. If you know you can realistically pay it off within the interest free period, it could well be a good idea. If you’re not sure then you need to be wary of 0 balance transfer credit cards – leaving your debt for longer than the interest free period could costs you high interest repayments, the average interest on credit cards being around 17.5 in the UK. If you run out of time and choose to move your debt, meanwhile, you may be met with the alternative cost of the card’s transfer fee. If you don’t really know how long it will take to pay off your debts, a lifetime balance credit card might be more appropriate.
DON’T: Make purchases
Unless your 0 balance transfer credit card terms specify that the card is 0 on purchases, the likelihood is that you will have to pay very high interest on any purchases you make with the card. Even if the card does specify ‘0 on purchases’, many customers don’t fully understand the conditions attached to this. Certain purchases could still carry high interest rates, as could instant cash transactions, such as cash withdrawals, so people often inadvertently trigger these expenses simply due to not understanding the terms and conditions attached. Also, making any purchases will increase the overall debt and make it harder to pay off the balance before the end of the promotional interest free period.
Author Resource:
Credit Choices offers free price comparisons and advice on interest free credit cards (http://www.creditchoices.co.uk/credit-cards.html ) and 0 balance transfer credit cards (http://www.creditchoices.co.uk/0-balance-transfers.html ).
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