When they’re used efficiently, credit cards can prove to be a great source of cheap lending. Your opinion on this probably differs if your debts have mounted up and they’re costing a fortune in interest. This is where a balance transfer card comes in handy. Find out more about these credit cards below.
How Do These Cards Work?
Balance transfer cards are perfect for to helping people to reduce their debts. They allow you to move a balance from one or more existing cards onto a new card with a new provider.
Most balance transfer cards offer a 0% interest period, some of which last well over two years. Provided that you make your minimum payments on time, you’ll have this entire period to work on reducing your debts and it will cost you nothing in interest.
So, given that the average credit card rate was over 18% at the beginning of 2014, you could be saving over £180 a year for every £1,000 of debt.
Watch Out For: Balance Transfer Fees
One thing to watch out for is the balance transfer fee – a charge of around 2-3% of the balance that is added on by the new lender for agreeing to take on your debt.
The longer the 0% offer, the higher the fee is likely to be. So it’s worth weighing up whether you could actually benefit from a shorter 0% deal with a lower fee.
Watch Out For: End of the Intro Offer
Another thing to watch out for is the end of the introductory offer, when the card reverts from 0% up to its standard interest rate. This is likely to be quite high, as it helps to finance your 0% period.
So if you haven’t paid off your debt by the time the offer finishes, you may need to think about switching your balance again or moving to a simpler ‘low-rate’ card instead.
A Few Final Points…
Finally, there’s a few things to consider before applying for a balance transfer card.
- Firstly, you can’t transfer a balance to a card by the same provider, or even to the same banking group (i.e. you can’t transfer from a Halifax card to a Bank of Scotland card). Check out our table of banking groups here.
- Secondly, you should check your credit history before you apply. This will give you a good idea of whether you’re likely to be accepted for a market-leading product or whether you’re better off applying for a less spectacular deal.
- Thirdly, once you’ve got your card, don’t slip up and give the lender the excuse to whack the interest rate up. Ensure that you make at least the minimum payment on time every month. This way, you’ll avoid any extra costs.
The Best Balance Transfer Deal
Barclaycard’s Platinum Visa offers 34 months at 0% on balance transfers (correct to September 2014). Find out more about this card and apply here.