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Balance Transfer Credit Cards

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We’ve all seen the adverts on TV trying to temp us to transfer our credit cards or get junk mail through the post declaring you are entitled to 0% or low interest credit card and you must ‘apply today’! But what do balance transfer credit cards really mean for us? Are they just another way of drawing us into further debt or can they actually help with our finances?

What are balance transfer credit cards?

In layman’s terms, a balance transfer credit card is used when you have one or more credit card with debt owed and you transfer that debt onto a new card, usually with a low or 0% interest rate. They are designed to attract new customers with the low rates and will then normally return to a normal or higher rate after the initial period – normally 6 to 26 months. So if you had a credit card with a balance of £1000 and were paying 22% interest, you could transfer that balance onto a card with 0% interest, and so everything you paid off on it would directly reduce the balance instead of paying expensive interest rates. In theory, if you use a balance transfer card correctly, they can be a great way of reducing your debt whilst paying little or no interest, but you have to ensure you follow some golden rules to get the most out of them.

Balance transfer credit cards

0% credit cards, really?

Even though the balance transfer is 0%, it doesn’t mean that the balance is 0%. In other words, if you start spending on it, the interest rate will probably be considerably higher. If you transfer your balance, make sure you make at least the minimum payment each month (so you don’t lose your 0% interest rate) or as much as possible to reduce the debt as quickly and cheaply as you can. Also remember that each time you apply for credit, you are required to pass a credit check and the more credit checks that are done for you can actually have a detrimental impact on your credit score.

Beware of credit card fees

Most balance transfer credit cards will charge you a transfer fee based on the amount moved and they all differ in the length of time the 0% or low interest rate is offered, so do your homework and check out what cards may be best suited to you. Barclaycard are currently offering some of the longest 0% periods and Lloyds have some of the lowest fee’s. If you are planning on using the card for spending as well, then check the interest rates for purchases too as these will differ greatly among companies.

Less than perfect credit rating?

Usually, the very low or 0% interest rate balance transfer credit cards are normally reserved for those with an excellent credit rating, so if yours is less than perfect, you may struggle. However, as long as you haven’t any recent CCJs or defaults, there are now companies offering the same great rates and may help you re-build your rating. The fluid card from MBNA and Barclaycard Platinum can offer 0% for 15 to 18 months respectively and both are designed to help people rebuild their credit score with a credit card.

Don’t forget to repay quickly

With most balance transfer credit cards, the aim is to repay the debt as soon as possible before the rate jumps up or you have to move the balance again. Those wanting more long term repayment options may prefer to look into personal loans to repay credit card debt at a lower rate, but if you are prepared to do a little research and have a good credit rating, then balance transfer credit cards can be cheapest option for you.

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About Rebecca Robinson

About Rebecca Robinson

After spending the last 8 years juggling life as a mum of two, wife and working full time as a Project Manager for a global telecommunications company, Rebecca Robinson made the decision to follow her love of writing and took the plunge; turning her passion into a full time career. Since becoming a full time writer, Rebecca has worked with various media and copy-writing companies and with the ability to make any topic relevant and interesting to the reader, now contributes to The Working Parent on articles ranging from credit cards to teenage relationships. Ever the optimist, Rebecca's dreams for the future include a house in the country filled with children, dogs and horses in the field!

Website: Rebecca Robinson

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