Credit Card Balance Transfers

What's the story?

We all do it - you are running a little short on salary for the month, and you open the newspaper to see a huge glitzy ad parading a tempting little dark secret... almost money for nothing! We wish!! As we all know in the back of our minds, you don't get something for nothing, but that rarely stops us diving in - after all, we'll pay it off at the end of the month... wont we??!!

Typically, those of us with a credit card were suckered in by the glitz and promises of a good credit card ad campaign, offering us exactly what we want to buy, right now while we will suffer later, but only slightly! The problem arises when 'later' comes, and we find ourselves suffering more than we thought. Balance transferring is exactly as it says on the tin; it's using the promotions the companies offer to OUR advantage! The credit card lenders offer us such incredible incentives safe in the knowledge that the majority of us will forget all about the massive interest rates they are charging, and simply make our monthly payments. What we should be doing is moving on to the next company as soon as our repayments increase, just as in the following example:

1. Jon has a card that he used to buy his new HD TV, costing £1,000. He has a six month interest free deal, with a minimum repayment of 5%, meaning that for six months, he pays £50 for arguments sake. His balance at the end is £700, having paid off around £300.

2. After this, the APR of 30% kicks in. Over the following 6 months, Jon pays the minimum repayment, around £35 per month and ends up with a balance of £580 - he's paid off £120 of the loan over 6 months, making around half of his payment interest!

3. If John had switched to a zero percent offer, and paid just £30 per month, he would now have a balance of £490!

Surely that's all the incentive you need?!

How do I get started?

First off, you need to find the deals; there are a number of websites that will do this for you, such as confused.com or even uswitch.com. Once you've found the deals, your next port of call should always be your existing card company, because they may well offer you a prolonged deal if they get wind that you're off! If they fail to do so, then simply apply elsewhere, and be on your merry way!

Are the deals STILL available?

They are, but they are becoming increasingly rare as banks tighten their belts and slow down their rate of lending. Increasingly banks are beginning to make one of charges for balance transfers, usually a percentage of the amount you want to transfer. Though it takes a bit of maths, you will probably still find that these deals are cheaper than the usual interest rate.

A Word of Warning...

This is an easy way of stopping further debt accruing, but you should always use the opportunity to make the largest repayment you can towards your capital - minimum repayments every month are a fast track to problems down the line. Remember that credit card companies are in no way obliged to accept your application. There may well be a time that the deals don't come along any more, and you need to be best placed not to suffer from a massive rise in required repayments. If you ever find yourself in a tight spot, the key is always communication - make sure you talk to your lender, they may well have some flexibility in order to 'cut you some slack' for a period.