Credit card customers warned about dangers of 0% balance transfer cards
During the first quarter of the year many consumers try and deal with the debts that they have accrued over the Christmas period by transferring their high interest credit card debts onto 0% balance transfer cards in order to avoid paying interest on their balance.
However, many end up paying over the odds simply because they fail to compare the different terms of these cards or decide to spend on the cards as well as transfer their balance.
Industry professionals are now urging consumers to make sure that they get the right card to transfer their balance, and that they avoid spending on the card.
There are a number of things that consumers should look at when looking for a 0% balance transfer card. Firstly, it is important to look at the interest free period offered, as the longer this period the more time you will have to repay the balance on your card without being charged any interest.
Another thing to look at is the transfer fee charged. With 0% balance transfer cards you are charged a fee that equates to a percentage of the amount that you are transferring, and this fee can vary from one provider to another, although it is typically between 2-3% of the total amount that has been transferred. It is important to check this so that you do not have to pay too much to transfer your balance.
It is also important for consumers not to spend on the card. Many 0% balance transfer credit cards offer a shorter 0% purchase period, but any balance accrued from purchases gets trapped behind the transferred balanced, and all repayments are applied to the transferred balance leaving the purchase balance to accrue interest.
One industry official stated: ‘The main message for borrowers transferring a balance is always to read the small print and check out the way interest will be charged if you intend to spend on the card. Some cards offer a 0% deal for balance transfers and new purchases - but the majority impose different rates on the transferred balance and new spending. If borrowers know they need to keep using a credit card, it may be preferable to have two cards - one to clear a balance and the other for new spending.’
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