Transferring credit card balance does not always do the trick

Over recent years many people have benefited from transferring the balance from their high interest credit cards onto a 0% balance transfer credit card, and then repaying the debt without being charged any additional interest. This can save consumers a small fortune, but it does require some discipline, as it is important to ensure that you clear the debt that has been transferred before the interest free period expires. Experts have stated that in most cases this does not happen, thus reducing the benefits of such cards.

According to M&S Money, around 51% of UK consumers have transferred their balances in the past, moving debts from interest charging credit cards onto a credit card that offers 0% interest on their transferred balance for a specified period.

However, the data also indicates that only a third of us manage to clear the debt in the interest free period with the rest of us clearing, on average, only a quarter of the amount that we transfer. Once the interest free credit card period is over the credit companies tend to start charging hefty interest rates on the remainder of the balance, and with the average amount being transferred standing at around two thousand pounds, this could mean a lot of interest.

According to some experts, consumers may benefit more from a credit card that offers a low interest rate of around 3.5 – 5.5% for the life of the transferred balance, as there is no deadline with regards to when the balance must be cleared providing the minimum repayments are maintained.

One expert stated: "Zero per cent balance transfer deals are an excellent way to start the process. But remember if you do not clear the debt in the introductory period you will start paying interest and often that will be at a relatively steep rate. Life of balance cards charge a low rate until the debt is cleared and could be the better solution."

Alisdair Milton
17th January 2007

More Information:

• Quick Balance Transfer Guide
  Balance transfers allow card holders to transfer the money they owe to their existing credit card to another, usually at a special rate of interest. The new credit card company pays off the old credit card debt and transfers it to the new card. This article will tell you how to play the game.
• The True Cost of Balance Transfers
  Balance transfers are a great way to consolidate credit card debts into one place, especially when there are many 0% deals available. However, there are hidden costs.
• Causes and Cures Of Credit Card Debt
  For some, credit cards can prove a temptation too far, and soon they find themselves in debt. Simple precautions will keep the savvy card holder from such dangers.
• Tips On How British Women Can Climb Out Of Their Growing Credit Card Debt
  More women in the UK are spending money on credit cards than at any other time. In percentage terms, there are now more British women spending more each month than they earn.