If your plastic has taken a pounding over the festive season and you’re looking for breathing space, now could be the time to apply for a balance transfer card.
As these credit cards are currently offering a period of up to two years at 0 per cent interest, this gives you the time to save up and pay off what you owe – without racking up hefty interest charges in the meantime.
And you don’t need to wait until your bill lands on the doormat over the next few weeks, you can apply for a card right away.
Balance transfer best buys
Barclaycard has just extended the balance transfer period on its Platinum card to a huge 24 months, prompting speculation that other providers will follow suit – potentially sparking a price war.
Next in line is HSBC’s card offering an interest-free period of 23 months, but this is only available to customers who also hold an HSBC current account.
Barclaycard then features again in the “best buy” charts with a balance transfer card offering 22 months at 0 per cent, along with the Halifax ,which also has a card offering 22 months’ free of interest.
Don’t forget the fees
In most cases, balance transfer cards charge a percentage of the debt to transfer it; this is usually around 3 per cent.
For example, the Barclaycard Platinum Balance Transfer 24 card comes with a balance transfer fee of 3.2 per cent, while HSBC charges 3.3 per cent.
The 22-month Barclaycard has a fee of 2.9 per cent, and the Halifax charges 3.5 per cent of the balance you are transferring.
When choosing a new balance transfer card, the key is to shop around.
“If you’ve got a great credit rating, you can largely take your pick from the best credit card offers available, so 0 per cent introductory balance transfer deals are very attractive,” says David Black from financial analyst, Defaqto.
“But note that almost all of them will charge a balance transfer fee, so do factor this in when you’re choosing between the various offers available.”
Chris Griffiths from Confused.com adds that leading offers are often reserved for new customers, and that most providers won’t allow you to transfer balances between cards from the same institution.
“It is crucial to find the right credit card for your profile,” he says. “Confused.com offers a free Card Matcher Tool that can let you know whether you are likely to be accepted for the card you want before applying; this service is secure, and won’t damage your credit score.”
Before applying for any credit, it’s also worth getting a copy of your credit profile; these are available for £2 from the main credit reference agencies: Experian, Equifax or Callcredit.
While a balance transfer card can help you manage your debts, you still need to be very disciplined, as the debt on the card will still need to be paid off eventually.
First off, you need to resist the temptation to spend – even though many of the “best buy” balance transfer cards offer shorter 0 per cent deals for purchases – as this could defeat the object of the card.
The key is to take advantage of the lower rates to set up a repayment plan to ensure you clear the debt during the interest-free period.
“Ensure your make at least the minimum monthly repayment on time because if you don’t, you may find you lose the 0 per cent introductory rate,” says Black.
“Also bear in mind that there’s no certainty you’ll be able to get another 0 per cent balance transfer offer when your deal ends – so do make plans as to how you’re going to repay the balance, as it won’t be at 0 per cent forever.”