Credit Cards & Loans
Top tips: getting the best balance transfer deal
Balance transfer credit cards allow borrowers to move debt from an existing credit card to a new credit card provider.
These cards often have special 0% interest introductory offers to entice new customers. But these deals come with a time limit and often, a fee.
Nicolas Frankcom, money expert at uSwitch.com gives his top tips on getting the best deal:
Remember the transfer fee
When you’re looking at moving existing debt, how long you have to clear it may well be a key factor. If you need relief from interest for as long as possible, you can get up to 40 months. But make sure you factor in the cost of transferring the debt – the transfer fee is as important as the period. However, if you’re after the cheapest option and don’t need more than a couple of years to clear the debt, a £0 fee card could be best for you.
Check the rate you’ll actually get
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Like all credit cards, what you see advertised is not necessarily what you’ll get – it depends on your credit score. You need a decent credit score to get the best balance transfer periods, but there are some shorter deals available to those with a less than perfect score. Before you apply, it’s worth finding out your what your credit score is, so you don’t apply for a card that may not be suitable – this can have a negative impact on your credit score, and further hamper your chances of getting a better deal.
Clear the debt, don’t add to it
One of the most important things to remember, once you’ve chosen the best card for you, is to not spend on it. Balance transfer cards are a great way of giving you some breathing space on existing debt so you can clear it, not add to it. If you find yourself spending on it as well you can quickly see your debt spiral, and any spending you fail to clear will be charged at a higher rate.
The only exceptions here are cards which offer 0% on balance transfer AND purchases. These tend to have shorter periods, but can help you multi-task managing existing debt and future purchases.
Set money aside to clear your debt
To make the most of the deal, you will ideally clear the debt before the 0% interest offer runs out. It’s a good idea to put money aside every month in order to do so – perhaps in a high interest current or savings account so that you can earn interest. As long as you make the minimum payments every month, and have the money set aside to clear the debt just before the interest-free period ends, you will be quids in.
Look further afield
It’s also worth noting that you can’t transfer a balance between two cards issued by the same provider, so you may need to look further afield than your usual credit card provider. Luckily there are plenty of deals on the market, from a range of providers, so you should still find a good deal that works for you.
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