Cut credit card debt with a balance transfer card
Fed up with paying steep interest charges on your credit card debt? Switching to a balance transfer card could give you as long as 33 months to pay off what you owe without being hit by extra costs.
Nearly half of credit card holders (49%) were paying interest on their credit card debts in January this year, according to UK Finance data, despite there being plenty of cards available offering 0% introductory rates for nearly three years. Outstanding credit card balances were up by 5.7% compared to the previous year.
If you want to pay off your debts without worrying about interest charges, it’s well worth opting for a balance transfer card, which as the name suggests enables you to move what you owe across from another card. You’ll then normally have between a year and nearly three years to pay back what you owe without having to pay any interest.
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According to Moneyfactscompare.co.uk, credit card customers moving to a 0% card could find themselves around £430 better off if they switched a £3,000 debt from a card charging a typical annual percentage rate (APR) of 24.9%. This assumes they make fixed payments of £250 monthly.
Current best buy balance transfer credit cards include Barclaycard and HSBC’s cards, which both have a 33-month 0% introductory period and have balance transfer fees of 3.45% and 3.19% respectively. After their introductory periods end, both cards charge interest at a representative APR of 24.9%.
Other competitive cards include Tesco Bank and MBNA’s balance transfer cards which both have 32-month 0% introductory rates, and have balance transfer fees of 3.19% and 3% respectively. These cards also both charge a 24.9% APR when the 0% periods finish.
Remember that you must pay at least the minimum amount each month to keep the 0% rate. If you miss a payment this could mean the card provider withdraws the 0% rate and you may be charged a much higher APR.
Charlie Evans, money expert at Compare the Market, said “While there are many benefits to a balance transfer, it is important to remember that you must make at least the minimum monthly repayments on time or you risk losing your interest-free benefit. If possible, try to pay more than the minimum as this will help you stay on target to clear your debt before the 0% deal ends. If your balance isn’t paid off by then, you’ll start paying interest.”
It’s also really important to factor in any fees before deciding which card might be right for you.
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Katie Brain, Consumer Banking Expert at Defaqto, said: “Whilst balance transfer cards can help many get back or remain on track financially, be mindful of any monthly or annual fees which may apply to some cards which have a 0% balance transfer offer. Consider your individual situation, looking at both fees and offer length to see which is the best fit. Otherwise, you may end up paying more in the long run when your introductory deal comes to an end.”
If you feel as though your debts are spiralling out of control, don’t suffer in silence. Get in touch with an independent free debt advice charity such as National Debtline. You can contact them online at National Debtline, or by telephone on 0808 808 4000.