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Is it worth transferring my debt to a 0% credit card?
If you take out a credit card, you want the best rate you can get. Of course you do.
So if you have a credit card already and hear about another one which has a better rate of interest, it’s only natural that you’d want to benefit from the lower APR.
If you have an outstanding balance on your current card and you’re paying a sizable chunk of interest on your monthly payments, a lower APR may sound especially attractive.
But did you know you may be able to switch the debt from your current provider to a special new credit card, in what’s called a balance transfer?
In this blog, we explain some of the pros and cons of doing a balance transfer, as well as the process for doing it, if you think this is right for you.
What are the benefits?
Among the main motivations for doing a balance transfer is a lower APR.
Many credit card providers offer great introductory deals to entice new customers, including 0% APR even, for a set period. This means that if you pay your balance off before the 0% period ends, you won’t pay any interest on the balance.
If you get a good credit card deal, you may also think about moving the balances of your existing credit cards on to your new card.
This is known as consolidating your debts and is a good way of keeping track of where you’re at with your debts, as you’d only have one monthly repayment. Plus, if you get a 0% balance transfer card, you could save money on interest compared to what you’re currently paying.
0% is enough to get anyone’s interest but don’t be lured in by an attractive introductory offer without looking into it a little bit more. It may only be 0%, or a low per cent, for a short space of time.
If you don’t think you’ll have repaid all your debt by the time that period ends, you need to be prepared to either move to a different 0% credit card again (though ‘card hopping’ as it’s known, can damage your credit history), or stick with the current card and go on to the lender’s higher rate of interest.
On that note, it’s worth bearing in mind that every time you apply for credit – including a new credit card – the lender will check your credit history and many of the better deals will only be available to those who have not struggled to manage their borrowing in the past. You also need to bear in mind that to move your balance from one card to another, many providers charge a fee. This is typically around 3%. So for example, you’d get charged £30 for every £1,000 you transfer across.
Therefore, you’d need to do a bit of maths to work out whether it would be financially beneficial for you to switch or not.
How do I move my debt to a new credit card?
If you’ve shopped around and have found a card that you’d like to move your current credit card debt to – all you need to do is apply.
Providing you’re approved, it’s then just a case of paying the fee if there is one and transferring the money across, and you can start benefitting from a better deal!
Remember, once your debt has been moved across to your new credit card, close your old one down so you’re not tempted to spend more on it.