You will almost certainly have heard the phrase ‘balance transfers’
mentioned in the advertising banter of one credit card or another. But what
exactly is a balance transfer, and is it for you? Read on for all the information
you will need to be clear on both these points.
A balance transfer is where the outstanding debts from one credit card are
moved to a new card, with the provider of the new credit card paying off
the money owed on the old card. The amount you owe will be the same, only
you will owe it to a different credit card company. At this point you might
be wondering what the point is in a balance transfer, after all you will
end up owing the same amount, albeit to someone different. Well the answer
is simple – a balance transfer could save you money.
How can a balance transfer save me money?
With so many credit cards competing for your custom, the card companies
need to offer incentives for you to switch to their card, the most popular
incentive is to offer 0% interest rates for balance transfers. If you have
outstanding debts on your current credit card you will almost certainly
be paying interest on that amount, often as much as 18% - moving this debt
to a card offering 0% APR on the transfer has the obvious benefits.
This may seem to good to be true, swapping from paying a large APR to nothing
at all, but the card companies are keen to get your custom and will bear
this cost in the hope that you will stay with them and so earn them money
in the long run.
There are pitfalls to be aware of however, check the term of the zero percent
offer – if it is a fixed term then you will need to be sure that you
can pay off the amount within that period, or at least ensure that the standard
APR is at least as low as your current card’s rate. Some credit cards
offer nought percent on the life of the balance, meaning that you will never
pay any interest on the amount transferred – although you will need
to check what the company classes as the ‘life of the balance’
as there may be restrictions on this.
You will also need to check into if there are any charges related to the
balance transfer, as although the APR may be zero, this is not to say that
it is completely free. Always check through the small print, and be sure
to ask the card supplier to give you a complete listing of the costs involved
– in many cases there will be none but you do need to check.
Is a balance transfer for me?
If you do not have any, or only rarely have, outstanding debts on your
credit card then a balance transfer is probably not for you. If however
you have relatively large debts then moving these to a card offering nought
percent APR has the potential to save you considerable amounts of money.
Don’t forget that the APR of the transferred balance is not the
only aspect you need to consider, as the interest charges on new purchases
are also a very important factor.
If you are looking to transfer to another credit card, then take a look
at the list of credit
card companies that we have compiled for you.
You may want to consider the possibility of transfering your outstanding
balance to a loan, which will offer you a lower interest rate charge,
take a look at our recommended loans
website.
If you are looking for a loan other then a bridging loan, we recommend that
you visit Loans UK.
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