Juggling Credit Cards

After the Christmas splurge, the hangover and the aftermath toll, and it’s a good time to move money around by switching cards to save some much needed pennies. Compare credit cards at totallymoney.com

A balance transfer card is a cost effective way to pay off minor amounts of debt. It can save you hundreds, even thousands of pounds. So stop parting with your cash unnecessarily to the credit card companies and swap today.

These cards offer a set time period when they don’t charge any interest on the debt – it’s the nearest thing to a free loan.

A balance transfer credit card pays off all the debt on other high interest credit cards and offers a 0% interest rate for a fixed time period, whilst you repay.

For example, say you have £5,000 sitting on an Octopus credit card with a 18%APR that’s £75 a month in interest. If you move the balance onto a Squid card, offering 0% interest on balance transfers for 12 months you’ll be saving £978 in interest charges.

Debts can be moved from numerous cards onto a balance transfer card, and some cards even move overdraft debt. The potential saving is thousands of pounds.

For example, there’s £3,000 on a Lion card with an 16%APR, then £1,000 on a Sparkly things store card with a 35%APR, and a £500 unauthorised overdraft with Nasty Bank which costs £150 a month transferring could save around £219 per month by moving it onto the Puppy 0% balance transfer card.

What’s the real cost?
You don’t get nowt for nowt. You pay a fee to pay when you move your debt to a balance transfer card but it is less than the savings you will make.

The fees are generally between 2%-3%. So, if the Squid card has a 2.9% balance transfer fee the cost to you would be £145 if you moved the £5,000 Octopus balance over.

It is still beneficial to move the debt to a 0% balance transfer card. With the Squid card example, even considering the fee into, you would still save £833 a year by transferring the debt to the Octopus card.

Whilst on the hunt for a balance transfer card it’s important to consider the time it will take you to get rid of the debt versus the size of the balance transfer fee, the lesser the length of the 0% interest period the lower the balance transfer fee tends to be. It’s important to factor in your credit history as this will affect what 0% deals you can secure.

How do you choose which Balance Transfer Card is the best one?
You could use a clever comparison tool like Totally Money’s Money Match®. Just input your details about yourself and in a matter of seconds it collates the results by the cards most likely to accept your application.

Is it tricky to transfer a balance?
Balance transfers are simple. Give the balance transfer card company the details of the cards and monies you want to transfer they pay them off and give you a 0% balance on your new card.

Generally, this needs to be done within 60 – 90 days of taking out the new card.

Take heed
This can save you a lot of money, but it’s important to be smart. If you don’t follow the rules you could impact the benefits of the credit card.

Don’t Miss a Payment
Missed or late payments may incur a financial penalty. It could be small fine or even an early end to the 0% deal. It’s best to set up a direct debit to repay at worst the minimum payment each month.

Don’t Spend on a Balance Transfer Card
The 0% interest is only on balances moved onto the card from another credit source. If you spend you’ll pay interest on the balance. The standard interest rate on these cards can be high so if you don’t repay sufficient to cover the spending then you will be hit by the interest.

Don’t let the card extend beyond the 0% period
The 0% interest rate on your card is only for a fixed time. When this expires the remaining balance begins to earn interest at high rates (usually around 20%APR). Make sure you have cleared the balance before the 0% period expires or switch the balance again to a new card if you can’t clear the debt. Keep tabs on the time periods in your diary or calendar.

To plan another balance transfer you need time so make sure you have enough for the new application to be processed. Start shopping around for a new card before your current interest free offer runs out by at least a month.

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