Clearing Debt With Balance Transfer Credit Cards

How to Pay off Debt by Interest Free Credit Card Transfers

Nov 4, 2009

Looking for 0% Balance Transfer Deals Online, Darkone

Some credit cards have high interest rates costing the borrower dearly. But shifting the money to 0% balance transfer credit cards could save the borrower thousands.

Balance transfer simply means moving money from one account to another. But with shrewd shopping, the debtor could save hundreds or thousands of pounds by moving their balance to a new interest free credit card account offering a cheaper borrowing rate.

The shrewdest move involves shifting the money to a new account that is interest free for a long term. For a flat fee, usually a percentage of the amount being moved, the debtor is more able to pay off the credit card debt more quickly.

The Cost of Credit Cards

When it comes to opening credit accounts and store cards, what once seemed a convenient arrangement could veer out of control when late payment charges, huge interest rates and other bank charges makes minimum payments more crippling and lead to going over the limit and into arrears. This can be avoided.

How Interest Free Balance Transfer Works

A simple example of how the debtor can save money by transferring the balance owed to another account can be seen thus:

The debtor has a £4000 debt with a borrowing rate of 17%
The debtor moves the balance to a new account with a borrowing rate of 0% for a fixed term for a flat fee (usually around 2 to 4% of the amount borrowed. It is worth shopping around for the best deals)
The debtor saves hundreds of pounds on interest over the fixed period, and is able to save this money to pay off the debt
When the term runs out, the debtor may transfer the money to another account offering 0% interest or one with a low interest rate over a set period
And so on

The Drawbacks of Balance Transfer Credit Cards

Balance transfer deals are open mainly to new customers
The money must be shifted before the term is up or large interest rates will accrue
Customers could be rejected if they already have any of the lender’s products within 12 to 18 months
Those with a poor credit score or with CCJs may find it difficult to balance transfer to a good deal and in fact will be offered a bad deal
Balance transfer is a great way of paying off debt, but certainly not for borrowing. The debtor must refrain from borrowing from the balance transfer card for this will cost dearly. If credit is urgent, it could work out cheaper to borrow elsewhere.

The Best Credit Cards Offering Zero Percent Balance Transfers

According to Martin Lewis’s Money Saving Expert, the best 0% transfer deals are Virgin credit card, NatWest Platinum credit card or similar from HSBC, RBS or Abbey. Some of these offer 0% transfers for up to 15 or 16 months at a fee of around 3% of the loan. However, there are always new deals on offer for those who are unable to benefit from these. Nationwide, the Post Office or Egg offer similar deals. Shopping around is the best answer, but watch out for hidden fees.

How to Clear Debts By Balance Transfers

Credit card debt can be reigned in by shrewd use of 0% balance transfers. But to make it work, the debtor must pay off the money within the set period. Spending money using the balance transfer card is certain to land the debtor into deeper debt. Working out an affordable sum to pay out of the family’s disposable income is a great way of making 0% transfers or one with a competitive borrowing rate, work out for the debtor.

The copyright of the article Clearing Debt With Balance Transfer Credit Cards in Personal Debt Management is owned by Rachel Wills. Permission to republish Clearing Debt With Balance Transfer Credit Cards in print or online must be granted by the author in writing.