Balancing the books
The impact of the infamous 'Credit Crunch' of 2008 still has a grip on the UK economy as we head into 2009. The financial forecast is peppered with warnings of further downturns and of hard times ahead, particularly for customers with outstanding debts on credit cards. But a New Year can give you an opportunity to hunt down a bargain that may help you weather the financial storm a little easier and guide you into smoother monetary waters.
Tempting 0% offers on credit cards have been noticeable by their absence this year as credit card companies tighten their belts in anticipation of another lean year. But they are out there, with some banks even joining in the frenzy to tempt wary high street customers into their branches with 'Sales' on financial services, including balance transfer credit cards. The smart consumer can take advantage of this desire to please by the credit card companies and snap up a bargain on balance transfers. Many credit card companies are now reducing their exposure in the marketplace by only accepting customers with very good credit histories. Any small blip on your record could stop your chances of taking advantage of the few 0% offers that are available, so a worthy New Years resolution might be to check your credit history records. If there are any discrepancies on your record (even something as insignificant as an incorrect postcode) they could affect your ability to gain credit. By checking that all your details are correct and up to date, you have a far better chance of taking advantage of the offers that are available.
There are a few things to remember before you apply for a credit card balance transfer offer. You will be required to pay a balance transfer fee, usually around 3% of the total amount transferred. Some cards have higher rates than others, so again it pays to search the market before deciding on your best option. Some credit cards have a minimum fee, regardless of how small the transfer. If you are only looking to transfer a small amount onto a new card, a minimum fee could make the process much more expensive than it needs to be.
Not all 0% balance transfer credit cards are interest free for purchases as well. There is a mantra that anyone thinking of transferring balances between credit cards should learn " never use a balance transfer card for purchases as well. The amount you pay each month on your new card will go to pay off the most recent transactions (your purchases) rather than the initial balance transfer. If you treat the card as you would any other credit card, you may find that the interest free period has slipped by unnoticed and youre suddenly paying interest on the balance transfer anyway " negating the whole point of carrying out a balance transfer in the first place.
Some cards offer a tempting combination of 0% on balance transfers and 0% (usually for a much shorter period of time) on purchases. In a direct reversal of the above scenario, with these cards once the 0% on purchases has run its course your payments go to the amount attracting the lowest interest rate first, namely your balance transfer. This is known as 'negative payment hierarchy' and results in the customer paying the full interest amount on purchases (usually a minimum of 18% on most cards) and costing more in the long run. To reiterate; the best advice is to have two cards " one exclusively for your balance transfer and one for your purchases.
Once you've decided (wisely) to keep your cards separate, work out how much you can expect to pay each month and how much you will need to pay to clear off the balance transfer amount before the interest free period ends. Dont forget to factor in additional charges such as insurance (sometimes mandatory), any late payment fees and transfer fees. By taking active control over your finances, you may find the current economic storm much easier to weather. The financial market is subject, like any other marketplace, to greater consumer power these days, and as such a smart customer can take advantage of financial deals, even when the economic future looks somewhat bleak.
Tempting 0% offers on credit cards have been noticeable by their absence this year as credit card companies tighten their belts in anticipation of another lean year. But they are out there, with some banks even joining in the frenzy to tempt wary high street customers into their branches with 'Sales' on financial services, including balance transfer credit cards. The smart consumer can take advantage of this desire to please by the credit card companies and snap up a bargain on balance transfers. Many credit card companies are now reducing their exposure in the marketplace by only accepting customers with very good credit histories. Any small blip on your record could stop your chances of taking advantage of the few 0% offers that are available, so a worthy New Years resolution might be to check your credit history records. If there are any discrepancies on your record (even something as insignificant as an incorrect postcode) they could affect your ability to gain credit. By checking that all your details are correct and up to date, you have a far better chance of taking advantage of the offers that are available.
There are a few things to remember before you apply for a credit card balance transfer offer. You will be required to pay a balance transfer fee, usually around 3% of the total amount transferred. Some cards have higher rates than others, so again it pays to search the market before deciding on your best option. Some credit cards have a minimum fee, regardless of how small the transfer. If you are only looking to transfer a small amount onto a new card, a minimum fee could make the process much more expensive than it needs to be.
Not all 0% balance transfer credit cards are interest free for purchases as well. There is a mantra that anyone thinking of transferring balances between credit cards should learn " never use a balance transfer card for purchases as well. The amount you pay each month on your new card will go to pay off the most recent transactions (your purchases) rather than the initial balance transfer. If you treat the card as you would any other credit card, you may find that the interest free period has slipped by unnoticed and youre suddenly paying interest on the balance transfer anyway " negating the whole point of carrying out a balance transfer in the first place.
Some cards offer a tempting combination of 0% on balance transfers and 0% (usually for a much shorter period of time) on purchases. In a direct reversal of the above scenario, with these cards once the 0% on purchases has run its course your payments go to the amount attracting the lowest interest rate first, namely your balance transfer. This is known as 'negative payment hierarchy' and results in the customer paying the full interest amount on purchases (usually a minimum of 18% on most cards) and costing more in the long run. To reiterate; the best advice is to have two cards " one exclusively for your balance transfer and one for your purchases.
Once you've decided (wisely) to keep your cards separate, work out how much you can expect to pay each month and how much you will need to pay to clear off the balance transfer amount before the interest free period ends. Dont forget to factor in additional charges such as insurance (sometimes mandatory), any late payment fees and transfer fees. By taking active control over your finances, you may find the current economic storm much easier to weather. The financial market is subject, like any other marketplace, to greater consumer power these days, and as such a smart customer can take advantage of financial deals, even when the economic future looks somewhat bleak.
About the Author:
Financial writer James Noon writes for various popular financial-based websites. He specialises in breaking down financial jargon for the regular consumer. You can find out more about credit card balance transfer here.
posted by Debt Consolidation Loan at
11:43 AM
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