Balance transfer credit cards are a hugely popular credit item in the UK for those moving debt around to attract the best interest rates. We took a lot at what they are, and their advantages and disadvantages.
Balance Transfer Credit Cards – A Definition.
Balance transfer cards are a popular choice because of their obvious attraction. For people who are paying interest on a credit card, the ability to transfer the funds to a new card is invaluable. For an introductory offer term of up to two years, a card that will not charge interest on the balance. Naturally, this is an appealing proposal, as it may save a borrower hundreds of pounds.
Individuals can use these cards to transfer debt around to avoid paying interest. As a result, purchases made with such cards are treated as interest-free loans. Well, nearly, because the service isn’t really free, as you’ll see below. These cards, on the other hand, can be extremely valuable.
Balance Transfer Credit Cards – How You May Use Them
Some people obtain two separate credit cards in order to maximise the credit card offer system. One is for balance transfers, and the other is for purchases. Some cards, on the other hand, provide fantastic bargains and low rates on both purchases and balance transfers.
Let’s have a look at an example of how these cards could be put to use. If you paid for a £3,000 vacation with a 0% credit card for a year, you could set up a direct debit to pay £250 every month. As a result, you might pay off the debt just in time for the 0% interest offer to expire, allowing you to use the card to borrow money at no additional expense.
You might even put other debts on another card at the same time. And, once again, you will not be charged interest if you pay off the outstanding sum within the 0% term.
Balance Transfer Credit Cards – How You May Use Them
Transferring a balance, on the other hand, is rarely fully free. In the current market of the amount being transferred, there is normally a “handling fee” of between 3 and 4%, so the key is to figure out if the handling fee will be less than the interest you would pay on the balance if it remained on its existing credit card. For example, if you were charged 4% on a £2000 transfer, you would be charged £80 in handling fees. However, if you paid 20% yearly interest on that debt, it would cost you around £33 every month.
The occasional provider will offer free transfers but demand an annual fee for the card. You should always read the terms and conditions for any card carefully because balance transfers and purchases will have different discounts.
Persistent Debt
While most credit cards are free to obtain, if you are late or skip a payment, or if you exceed your credit limit, you will face financial penalties. If you suspect you’re having trouble paying your bills, seek help right away. National Debtline and Step Change are two organisations that provide free debt assistance.
