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Balance transfer Credit Card Deal

Balance transfer credit cards

Most people associate credit cards with spending, but in certain cases they can be used to help manage debt. Balance transfer cards are designed for this purpose - but if you`re not careful about how you use them, you could find your problems mount.

How do balance transfer cards work?

Balance transfer cards allow you to move your debt from one credit or store card over to another card and in some instances they can even be used to move an overdraft. The idea is that the rate of interest you pay on the balance transfer card should be lower than what you are paying on your existing card, helping you to get on top of your debt.

Indeed many standard credit and store cards have annual percentage rates (APR) in excess of 18 per cent. However, with balance transfer cards, the APR is usually much lower and you may even be able to pick up a card that offers a zero per cent interest rate for an introductory period meaning that the payments you make on your card each month will go directly towards reducing your debt for this limited period.

Generally, zero per cent offers are only available to those with good credit scores. However, even if you don`t qualify for a zero per cent card you may be able to pick up a low rate card with a substantially lower interest rate when compared to your existing card and often offered over an unlimited period.

Another incentive is that you could potentially move the debts you have accrued on several cards over to one card, making it easier to keep on top of your repayments and how much you owe.

So is there a catch?

You should not continue to spend on a balance transfer card unless it offers a zero per cent purchase rate that is of an equal length to its introductory offer on balance transfers. This is because any additional debt accrued will not be paid off until you have cleared your balance in full.

Also be aware that the majority of credit cards now charge balance transfer fees - typically in the region of 2.5-3.0 per cent of the balance transferred. This needs to be considered along with the interest rate when determining the right card for you.

Remember to check the terms and conditions of any card before you apply and familiarise yourself with any additional fees and charges. Also bear in mind that the leading balance transfer cards will only be available to those with good credit scores and if you are juggling debts then you may not qualify for the deal you want.

Are there other options?

A low-rate balance transfer card may be a better option than a balance transfer card with a zero per cent introductory offer if you think it is unlikely that you will be able to pay off the debt during the introductory period. Whilst you could move to another card once the zero per cent deal expires, you may prefer a long-term low rate for stability. Sometimes these are known as life of balance transfer cards.

Alternatively, you may be better off consolidating the debt with a personal loan. Generally, the interest rates on a personal loan will be lower than those on a credit card meaning smaller monthly payments - however, by borrowing more money to pay off your existing creditors it will take longer to pay off a larger debt.

If you decide a balance transfer card is your best option then make sure you compare credit cards online to get the best deal available.