The Hidden Pitfalls of 0% Offers
If you pay interest on a credit card balance, then it might well be time to think about switching. There are plenty of credit card providers that offer 0% on balance transfers, meaning that you could easily switch and shave hundreds of pounds from your monthly bill. Finding out about which companies offer the best 0% deals is easy – just head to a site like Moneysupermarket, which has a number of useful comparison tables for credit cards. There are, however, a few pitfalls that you should be wary of when you are looking to switch a balance. Take read of this article for some 0% advice.
As a general rule, you’ll have to pay a fee to make a balance transfer. This is often around the 3% mark – NatWest credit cards and Virgin Money, for instance, take 2.9% and 2.98% respectively. The idea behind a ‘0%’ deal is that you pay 0% interest p.a on your transfer. You will, however, normally pay a set percentage fee. The only card currently on the market that allows you no fee is from Ulster Bank,
but you will only get a 0% p.a on balance transfers for six months with this card.
One thing that many people get confused about when switching to a 0% balance transfer card is being able to also spend on that card. Many card providers required borrowers to pay off a transferred sum before clearing any new spending. However, not all do, and the majority impose different rates on the balance transfer on new purchases. To keep things simple, it is advisable to take out two cards if you want to continue to spend on a credit card. Use one for the balance transfer and then cut it up, then get another one specifically for making new purchases. ASDA Finance offer 0% credit cards that have 0% on purchases for 3 months, 0% on balance transfer for 9 months, and you earn points whenever you spend on the card. This can often be very lucrative, so long as you pay it off in full each month after the 0% on purchases expired.
When taking out a credit card with a 0% deal on either balance transfers or purchases it is absolutely that you stay organised and keep up the repayments. If you don’t, you may find yourself stung by an interest charge and lose your 0% deal. In February 2008 the Mail on Sunday reported that 39 year old computer programmer Paul Williams was charged a total of £182 for failing to make the minimum monthly repayment for just one month. He also lost his further 0% deal with MBNA, and only after lengthy negotiations was he able to get reimbursed and reinstated on his offer. The key is to be absolutely certain of meeting the minimum monthly repayment every, and probably the best way to do this is to set up a direct debit and then check your account every month online.
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