Credit cards offer a flexible way to make payments but if they are used effectively they can also be a great tool that can help you to handle your debts and save yourself money in the form of interest.
Many consumers make purchases on store cards or costly credit cards that could charge you up to 30% on your balance. This can very quickly rack up and become a very costly way to pay.
Cut The Cost Of Your Debts
There is an easier way to cut the cost of borrowing by using a balance transfer card. This enables you to move your outstanding balance across from one card to another, normally from a higher rate card to a cheaper one. This could save you a lot on interest payments and in some cases eliminate them completely by choosing a 0% balance transfer card.
You can combine balances from different cards as long as you stay within the maximum limit set by the card provider. An example would be, some cards set the upper limit at 90-95% of the credit limit on the new card.
0% Balance Transfer Cards
You could essentially use the balance transfer card as an interest free loan. You could use it to pay off any other cards and debts and if you pay the card off during the interest free period, you could save on the interest payments. To make sure that you keep up to date with the repayments, it would be a wise idea to set up a direct debit. Also, once you have cleared the balance on your existing cards, get rid of those unwanted cards to remove the temptation to use them again.
Balance Transfer Fees
The process is not totally cost free of course. Most cards charge a transfer charge, normally between 2-3% of the transfer value. Say, for example, you switch a balance of £1000 you would pay a fee of around £30. Although the fee may seem costly, you could easily make the money back in saved interest payments.
There are other perks to the cards such as offers on purchases. Some cards offer an interest free period on purchases but be careful to read through the terms and conditions as they are likely to differ from the period on the balance transfer.
It may often work out better to have two separate cards; use one for purchases and one for the balance transfer to make sure you get the best deal on both.
Be aware that companies won’t let you transfer to another card from the same company and will often reserve their best rates for customers with a better credit score.
Card Usage Charges
Like with any other cars, be sure to stay on top of it and read through the conditions carefully. Issuers often charge an annual usage fee as well as penalty fees for late or missed payments. Like a credit card, there is also a charge if you breach your agreed limit so be sure to stay on track and keep a watchful eye on your spending to avoid damaging your credit rating.