Are 0% Balance Transfer Cards As Good As They Sound?
By: Matthew Lloyd | Posted: 05th June 2007
Balance transfer credit cards, as the name suggests, allow you to shift the outstanding amount from your current card to another credit card – often for minimal cost. This new card might offer an interest free period or a more attractive rate of interest. If you are lucky, you may be eligible for offers in which you pay absolutely no interest on transferred funds for up to a year. You may also get rates from some credit card companies which are almost on a par with regular loan rates.
Balance transfer credit cards were very lucrative when they were introduced some time ago. However, the vast majority now charge a fee of some sort and don’t seem to offer as good a deal as before. However, if you use balance transfer smartly, then you can still save a lot of money.
Keep Balance Transfer Cards only for Balance Transfers
Avoid using a balance transfer for both purchases and balance transfers. Your repayments will be allocated to the cheaper interest, which is normally a balance transfer. Your more expensive purchases will be allocated for payment last because this allows your credit card company to gain maximum interest and earn most money from your debts.
So, to get the best deal from such balance transfer cards, you need to:
- Opt for a card that offers 0% balance transfers, without any additional fees or surcharges.
- Select a card that makes this offer to you for the longest possible period.
- Avoid making any purchases from that card. Use another card which offers the longest interest free period to you for making your purchases.
- Pay off all your debts and clear all outstanding on your 0% balance transfer card before the interest free period expires. This allows you to keep a good credit score and also prevents you from accruing interest and further debt on the initial amount your borrowed as credit free money from the company.
- If you show that you have regularly paid off the monthly outstanding balance then you can negotiate a longer interest free period on your next 0% balance transfer card.
- Negotiate a better, lower rate from your existing company just before your 0% interest free period is about to expire. Instead of losing a customer, the company may consider your offer seriously enough.
- If they don’t, you can always opt for another credit card that allows you to enjoy your interest free period for a longer period of time. Become a rate tart by all means; at least you will save your hard-earned money in the long run and you will get the better of 0% balance transfer cards.
Matthew Lloyd writes for About Your Money. His articles provide users with useful advice on a variety of financial products, including credit cards. To find About Your Money visit www.aboutyourmoney.co.uk
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Tags: debts, credit card companies, credit card company, credit score, maximum interest, loan rates, repayments, free money, rate of interest, free period, attractive rate, 0 balance transfers, balance transfer credit cards, balance transfer cards