Where to take care
As with any form of borrowing, it’s important to stay on top of your repayments and pay at least the agreed minimum, or your credit rating could be affected. This could make it difficult for you to borrow in the future, and may even result in you incurring penalties and charges from your lender. Your lender may also decide to end the low interest rate offer you’ve been enjoying early.
A good way to keep on top of your repayments is to work out how much you need to pay each month to clear the balance by the end of the low interest period and then set up a Direct Debit for this amount – or as close to this as you can afford. This way you don’t even have to think about it.
Another thing to be wary of when taking out a balance transfer card is spending. Once you have shifted the balances from your other cards on to this one, it may be all too tempting to start spending on them again. However, this will mean you’re adding to your debt and you could end up in the same situation you were trying to get out of, with too many lines of active credit that you find difficult to manage.
Remember, because you have transferred lots of small balances to your new card, the amount you need to pay back each month will be more than these were on their own. And because you’re paying back a larger sum, it could take you longer to clear the balance than it would have if you had stuck to your original repayment agreement.
If you still have an outstanding balance once your card’s low interest rate ends, it is an option to take out a new balance transfer card. However, keep in mind that lenders can be wary of borrowers who make lots of applications for credit close together, or who regularly switch to new cards, as it can look like desperation. Instead, shop around to find the card that is most suitable for your needs and that you are most likely to be accepted for, so that you can cut down on the number of deals you apply for.