Consolidating debts? Do it for free with 0% balance transfer cards

By Charlotte Yau

While 0% balance transfer cards can help you payoff your debts interest free, they need to be used properly.

The beauty of 0% balance transfer credit cards combine your debts onto one card and get more time to repay without the pressure of interest.

These 0% cards are offered by banks such as Barclaycard and Halifax and even supermarket lenders such as Tesco Bank.

Essentially, you transfer debts from one card onto an interest-free card meaning you can just focus on making repayments.

And while most charge you a small fee, usually 1-3% of the amount of debt you’re shifting, some don’t, meaning you could pay everything off without paying another penny!

The benefits of a balance transfer

The best bit about a balance transfer card is the interest-free period as you can get a long time to pay off your debts with no interest to worry about. Some interest-free offers last for a whopping 40 months.

As long as you keep up with the repayments there will be no extra interest or charges to pay each month.

That will make a big saving on the amount you repay and give you some breathing space to make repayments.

Make use of the interest-free period

You will make the best savings by making all of your repayments during the interest-free period. For example, a 40 month interest-free card gives you more than three years to pay off your debts without any interest. That is pretty attractive.

You should work out how much you need to pay each month in order to clear the card by the end of the 0% period. To make sure you don’t miss a payment, it’s worth setting up a direct debit. Make sure you don’t get bamboozled.

Unless you pay off all your debt there will be extra interest charges to pay at the end of the offer period. And if you miss a payment the interest-free offer can be removed. One in five people have seen their introductory offer cut because they’ve broken the terms and conditions of the credit card, according to research by Consumer Intelligence.

People aged 18-24 are most likely to break the rules on a balance transfer card and subsequently lose the benefits available. Consider yourself warned…

Moving the debt to another card

At the end of the 0% period, a lot of people bank on being able to move their debt onto another 0% balance transfer credit card. That’s fine if you get accepted.

But if you can’t get a new deal you could be left paying the higher interest rates on your existing card so you shouldn’t bank on it.

If you’re seriously struggling to pay back your debts you should get some free, confidential advice from a debt charity like StepChange or National Debtline.

Top takeaway

Balance transfer cards can be a great way of skirting high interest repayments. But it can be a risky business, the best way to do it is to ensure that whatever debts you're putting onto your balance transfer card you can pay off in the 0% interest period. If you miss that cut off line you could be stung with even higher rates of interest so be careful and do your research beforehand.

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