Balance transfer credit cards are plenty at the moment and recently there has been a real war of providers about who is going to offer the longest 0% period. But if you want to use one of these credit cards for paying off your debt, there is more than just interest-free period to look out for. Some catches make the process of choosing a balance transfer credit card a bit less straightforward as it seems. Let’s have a look at them.
First of all, you should make serious and realistic calculations and decide over which period you can expect to pay off your debt. Taking out a balance transfer card and then making only the minimum payments is a dead-end as it won’t diminish the sum you owe, and at the end of the interest-free period you will be hit by the credit card interest, and those are pretty high. Always try to pay as much as possible into your balance transfer card, maybe by setting up a standing order.
Balance transfer credit cards are a perfect deal if you need more time to pay off your debts and the longest deals currently available are stretching to the impressive two years. Great news? Well, almost. The only problem is that parallel to the increase in the 0% period, there has also been a steady growth in the balance transfer fees. So, what to choose – the longest transfer period or the lowest fee over a shorter 0% term?
Several years ago a standard balance transfer fee was around 2,63%, while it is currently 2,93%. Standard, meaning “average”, while some banks charge as much as 3,5%, which means that the longer the deal is and the bigger the sum you are transferring, the harder it is going to hit you.
The answer is definitely no and there are several reasons why it is so – high APRs, dormancy fees and dangers of accumulating a lot of debt when paying only a minimum each month. A store card, taken out around Christmas and then forgotten, is like a ticking bomb, sure to explode and ruin your finances.
Around Christmas store cards are being more aggressively pushed upon customers. The offer of a 10% discount on your shopping seems appealing – but remember that you might end up paying more for running a store credit card than the cost of your shopping.
If you are in the process of planning your summer holidays abroad, having a closer look at prepaid cards and how they work is highly recommended. One of the latest offers arrived just this week from My Travel Cash, which announced that its prepaid cards will come with no fees and a 1% cashback on purchases.
My Travel Cash Euro, Dollar and Multi-Currency prepaid cards do not charge anything for using a foreign ATM. When you load your prepaid card, the pounds are automatically exchanged into the currency of the card at quite competitive rates. With a Multi-currency prepaid card there is a small charge of 2.99% each time the card is used for non-pound transactions.
Loading and topping up can be done via Internet or by phone and is free if you use a debit card and has a 2.5% charge if it is a credit card.
But the really new thing is that you can now earn 1% cashback on your purchases with My Travel Cash prepaid card. Cashback is paid directly to the card one month later in the prepaid card’s currency.
The downsides are common to most prepaid cards – a redemption fee to cancel and cash out the card and a dormancy/inactivity fee if you are not using it for a long time. But this is mostly compensated by the fact that a prepaid card is not connected to any account and in case of being lost or stolen you only lose what has been loaded there and not all your bank account.
See also Best Prepaid Cards
Capital One has recently joined a group of credit card providers, offering long 0% periods on balance transfers. Balance transfer credit cards are a useful tool of clearing a small-to-medium debt, and if played right, could be extremely helpful.
Capital One Transfer Master Card comes with a representative APR of 16.8% (variable) and a maximum credit limit of 12,000.
Balance transfers can be made with a 2.9% fee and 0% period will last until November 2012.
It also has a 0% on purchases until October 2011, but this is not the best deal of its kind, and, anyway, it is not advisable to mix up balance transfer and purchases on the same card.
This card is only available to those with very good to perfect credit rating, preferably home-owners, those over 21 years old, with income over £20,000 p.a. or credit card balances of under £10,000.
On the one hand, Capital One 0% balance transfer offer of 17 months is not the longest on the market. It is possible to find credit cards that provide up to 20 months interest-free. Nevertheless, since it is not possible to transfer balances between credit cards of the same provider, if you already hold a credit card from one of the big high-street banks, Capital One offer may come very handy.
