Beginner's Guide To: Balance transfer cards

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The Independent Online

There are hundreds of credit cards available, but with providers now more choosy, it is important to make sure you apply for the right card and one you're likely to be accepted for.

Over the next few weeks, we'll be looking at the different types of cards available to help you identify which is most suitable.

This week, it's balance transfer cards.

What is a balance transfer?

Credit cards aren't only for spending on. If you have outstanding debts on credit or store cards on which you are being charged a high rate of interest, you may be able to cut the amount you are paying by transferring the balance onto a new credit card.

Why bother?

A number of cards offer interest-free periods on balance transfers enabling you to save a significant amount of interest. The longest 0 per cent offer currently available is 16 months with Virgin.

You will be charged a balance transfer fee – typically 2.5 to 3 per cent.

You should aim to clear your balance during the interest-free period because you will accrue interest at the standard rate once the 0 per cent deal ends.

What to watch out for

Be careful about spending. Often, credit cards offering 0 per cent on balance transfers also give an interest-free period on purchases.

If the duration of both is equal, as is the case with the Halifax All In One card, which offers a nine-month interest-free period on balance transfers and purchases, it is fine to use the card for both purposes.

However, many products offer a longer interest-free period on balance transfers than on purchases. For example, while the Virgin card has a 16-month interest-free period on balance transfers, the 0 per cent offer on purchases lasts just three months – you'll be charged the standard rate once that ends. With cards such as this it is important not to use them for both spending and transferring a balance.

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