The credit-card balance transfer war shows no signs of cooling off with some interest-free deals now close to three years in length, so here are some useful tips to help you make the most of these offers, plus some of the stumbling blocks to watch out for.
Card companies are tripping over themselves to lend to credit-worthy customers, with Halifax, MBNA and Barclaycard all launching new offers in the last fortnight.
If you're thinking of moving your balance to an interest-free card, this guide could help you avoid the more-obvious potential pitfalls.
1. Double-check how much you owe – refer to your latest statement but don't forget to include any additional purchases or payments you've made since then – if in any doubt give your card provider a call to confirm.
2. Use an online calculator to see what you'll save by switching to a 0 per cent card – check The UK Cards Association or Money Advice Service
3. Work out how much you can comfortably afford to pay back each month – make sure this is manageable within your monthly budget. Divide your outstanding balance(s) by the amount you can afford monthly – then you'll know how long a 0 per cent term you need.
4. Be aware the longest 0 per cent term may not be the cheapest deal for you – As a rule of thumb, the longer the term of the deal the more expensive the balance transfer fee, so don't opt for 32 or 33 months if you know you can clear your debt much sooner.
5. You can't transfer debts between certain credit cards – e.g. MBNA and Virgin Money, existing Barclaycard balances to a new Barclaycard and no transfers between First Direct/HSBC/M&S/John Lewis credit cards as they are all part of the same group.
6. Find out if you are eligible for the card without a footprint being made on your credit record – Moneysaving Expert offers the pre-eligibility function on its website to help you do this. Also, some providers allow you to make a soft search as part of the initial application, including Fluid, Nationwide Building Society and MBNA. It's better to know this upfront rather than go through a 20-minute application process which is registered on your credit record, only to find that your application is declined.
7. Ensure you make your balance transfer(s) within the limited timescale permitted – some card providers request that transfers are made within 60 to 90 days of the date your card account is opened.
8. Don't give your card provider an excuse to cancel your 0 per cent rate – set up a direct debit to make the minimum payment each month (you are free to make extra payments on top of this) – otherwise, if you're late with a payment or exceed your credit limit your interest-free deal will be terminated immediately, meaning you will be faced with paying a high interest rate and be back to square one.
9. Three key reasons to close down your old card account(s):a – Removes the temptation to run up balances on the card(s) in the future; b– Cards with a zero balance will still be taken into account on your credit record as the credit limit on each card is considered as borrowing available for you to use; c –If you just destroy the card without closing the account, there is a security risk. If you move home and forget to advise the credit-card company, at the expiry date the new card would be posted to your old address.
10. Keep tabs on your new card balance and make a diary note for two months before your 0 per cent deal expires – this gives you time to switch again if you know the balance isn't going to be fully repaid by the time your promotional rate comes to an end.
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