Five Questions About: Balance transfers

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The Independent Online

What is a credit card balance transfer?

If you have existing credit card debt, you may be able to reduce the amount of interest you pay on it by moving it on to another card. The leading deals offer interest-free periods that run for more than a year. This could save you hundreds of pounds and mean you can clear your debt more quickly.

Hasn't the credit crunch made balance transfers impossible?

It's certainly no longer easy to be a "rate tart" and move your credit card debt from one card to another. However, it is still possible to take advantage of a 0 per cent balance transfer offer – the longest lasts for 16 months. Not everyone will be accepted, so check your credit file before applying as only those with good or excellent credit scores can successfully apply for the market-leading deals.

How do I make a balance transfer?

Many credit cards require you to do so within a fixed period of time, so it's best to move fast. You can make the transfer by phoning your new provider or through its website.

Will I pay fees?

Most of the leading balance-transfer cards charge up to 3 per cent of the transferred balance in fees. With the average credit card rate now standing at more than 18 per cent, this is still worth paying if it means you can take advantage of an interest-free period. Also, the transfer fee doesn't have to be paid upfront – instead it will be added to your balance.

Can I transfer a balance and still spend with the card?

Yes, but be careful. Most credit card providers apply a negative hierarchy of payments, meaning any repayments you make to the card would be set against the cheapest debt, namely the balance transfer you're paying 0 per cent interest on. That means you'd need to clear the entire transferred balance before you could repay the debt you're being charged for. Look for a card that offers the same length 0 per cent period on both transfers and spending, or avoid using your new card for purchases.

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