0% balance transfer cards can be a useful tool when trying to tackle debt (here is a roundup of the best 0% transfer credit cards at the moment) But remember credit card companies aren’t your friends and they are looking to make a profit from you. So below I list 5 things to look out for when tacking out a 0% balance transfer credit card.
1) Handling fee
When you move your money onto a new card with a 0% balance transfer offer there will be a handling fee of around 2-3% of the balance transferred. So check exactly what you will have to pay. While a lot of credit card companies will simply add this to the balance transferred, remember that as soon as your 0% promotional period is up you will pay the standard interest rate on this fee, as per the rest of your credit card balance, assuming of course you haven’t cleared your debt. But watch out as some providers apply the standard interest rate to the handling fee from the day the handling fee is applied to the account. Consequently your handling fee can work out more expensive than you first thought.
2) The 0% cut off period
In order to secure a 0% balance transfer offer you will usually need to transfer any existing balances across to the new card within a certain period of time, i.e. 60 days. If you miss the boat then you will have to try and secure another 0%, which will likely prove more difficult.
3) Interest on new credit card purchases
Usually when you spend on a credit card you won’t be charged interest on the value of the purchases if you clear your balance by the end of the month. But some credit cards will only do this if you clear your entire balance, including any transferred balances. Barclaycard are one of a number of companies that do this. So check the small print and if in doubt don’t spend on a credit card where you’ve taken advantage of a 0% balance transfer deal.
4) Snooze and lose
Remember if you are late paying your credit card bill any introductory offers are likely to be pulled by the lender. So set up a monthly direct debit to avoid late payment.
5) Typical APR
Although you will want to move any unpaid balance away once the introductory 0% offer expires, keep an eye on the cards standard APR especially if you decide to move to a low interest rate card rather than a new 0% deal. Remember that the APR you see quoted in offers will be the’ typical APR’ which is only offered to those with impeccable credit records. EU rules state that the advertised APR only has to be given to 51% of applicants.
What to do if you are struggling with debt
If you are struggling with debt then first of all read my article ‘5 simple steps to clear your credit card debt’. There are also a host of charities and organizations offering free debt advice. But be careful of companies pretending to offer free debt advice or passing themselves off as other legitimate debt charities. Full details of the legitimate organisations that offer debt advice and counselling can be found in my article ‘Where to get free debt advice’.
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