If you’re struggling with credit card debt, you have probably thought about doing a credit card balance transfer. This can help you consolidate your debt onto one credit card with zero interest and avoid having to make interest payments for a predetermined time period, typically six to eighteen months. Of course, there are a lot of terms and conditions associated with this type of offer. Here are some of the most important terms to examine when you’re choosing your new zero-interest credit card.
Look at the latest card offers.
The marketplace is always changing for credit card offers. Though the recent economic depression affected the UK credit card market, longer interest-free periods are available once more and you’ll likely encounter a fair number of appealing offers to choose from. Don’t take them at face value look up the terms and conditions before deciding. Some older card offers are still a great deal, but most of the best deals are limited-time offers. Some offers may be put back on the market with different terms, so if you’re using a comparison guide, always read the fine print on the credit card company’s website to compare it to the way the guide described it.
Compare the fees and charges.
Some credit cards have annual fees, while others are free. Certain cards charge transfer fees for the balance transfer. It’s common for a card to allow you one free balance transfer, but subsequent transfers either may not be eligible for the interest-free period or may cost you a certain amount. If you are consolidating debt from multiple credit cards onto one card, this is particularly important to look at! Most of these credit cards will charge the regular interest rate for all new purchases, so you’ll need to stop credit card spending before getting this card.
Look at the interest-free period and interest rates.
Most people only focus on this aspect, but don’t forget to compare the time period you have before you have to begin paying interest on your balance. You should also compare the interest rate (represented as an APR) so you know what to expect after your interest-free period is up and you have to pay interest again. A card with a higher APR might be fine if you plan to pay off your debt during your interest-free months, but if you have any doubt about your ability to do so, it may be better to go for the card with a lower APR.
Calculate your monthly payments with each card.
If you want to compare cards fairly and you plan to pay off your card, there’s a simple calculation you can do to see how much you would have to pay each month with various balance transfer offers. First, calculate the transfer fee for your debt. For example, if you were going to transfer £2,000 and your transfer fee was 2%, your transfer fee would be £40. This would bring you to a total of £2,040 on your card. Divide this number by the number of months you have interest-free. If you have ten months interest-free, you would have to pay £204 per month in order to pay off your debt before the interest-free period ended. Of course, a card that charged a 3% transfer fee but had a 14-month interest-free period might be a better deal, since your monthly payments would be about £148.
Assess and anticipate the penalties.
When you find a card with a great interest-free period and low transfer fee, look at the penalties before you sign up. If your interest-free status can be removed after just one missed payment, you’re going to need to be very careful to make your monthly payments! Some cards may charge a penalty, while others will allow you one mistake before taking action. Even the best deal isn’t such a good card if you miss your third payment and have to pay unanticipated interest for months to come.
Balance transfer offers are very appealing when you’re mired in interest from your credit card debt, but you need to be careful to compare the terms and conditions first. If you aren’t careful, you could end up paying a lot more than you thought you would need to pay! For those with a careful debt elimination plan, you can get out of debt with the help of one of these credit cards, however. Interest-free credit cards are a valuable financial tool.
Author and industry expert Sam Jones suggests that the best advice for the latest bance transfer offers can be found at http://www.uswitch.com/credit-cards/credit-card-balance-transfers on uSwitch
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