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"Officials warn consumers about 0% balance transfer cards"

By admin | October 2nd, 2008 | Balance Transfers, Credit Cards

Over recent months officials have been warning consumers about the problems that have become associated with 0% balance transfer credit cards, which have become very popular over recent years. Many people use 0% balance transfer cards to transfer balances from existing high interest cards, enabling them to them repay the combined balance over a period of time without being charged any interest on the debt. Whilst this sounds like an effective solution to avoid interest payments and clear credit card debt a little more quickly there are some things to look out for with these 0% balance transfer cards.

Recent reports have shown that despite the ongoing global credit crunch, and the tighter credit conditions that have come with this, many people are still flocking to try and take out a 0% balance transfer credit card so that they can transfer their higher interest debs and save money on interest on their credit card debt. This is a good idea, but consumers need to be aware of the pitfalls of 0% balance transfer cards, according to industry officials.

Officials state that firstly the consumer needs to ensure that they get the right 0% balance transfer credit card, as the interest free periods can vary from one card and provider to another, so it is important to compare different credit cards, which many consumers fail to do. Another thing that many consumers fail to look at is the balance transfer fee charges on these cards, as most do charge a fee of between 2-3% of the total amount being transferred, and this fee can vary. Some providers have ceiling limits on these fees, whereas others do not, so make sure that you also check this.

Consumers should also be mindful that the card should not be used for making purchases, as any purchase balance will get trapped behind the transferred balance, and all monthly repayments will go towards the interest free balance first, thus leaving the purchase balance, which will most likely be at a high rate of interest, to continue accruing interest until the transferred balance has been completely cleared. Consumers should make sure that they try and repay the transferred balance within the specified interest free period, as otherwise interest charges will start to be applied on any remaining balance once the 0% period expires.

One industry official stated: ‘The main message for borrowers transferring a balance is always to read the small print and check out the way interest will be charged if you intend to spend on the card. Some cards offer a 0% deal for balance transfers and new purchases – but the majority impose different rates on the transferred balance and new spending. If borrowers know they need to keep using a credit card, it may be preferable to have two cards – one to clear a balance and the other for new spending.’

Tags: Balance Transfers

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