0% balance transfers

0% balance transfer cards have been very popular in recent years. Here's how to pick the best one.

Switching to a 0% card

If you're carrying forward a balance on one or more credit cards, and being charged interest for the privilege, then consider switching the debts to a lender offering an introductory interest-free balance transfer credit card. By switching to a 0% credit card and paying off as much as you can every month, every penny you hand over during the interest-free period will go towards paying off your debt. Some issuers even allow you to transfer other types of debt, such as overdrafts and loans to a 0% deal.

Balance transfer fees

However, watch out for cards charging balance transfer fees. Many now charge a fee of up to 3% of the amount transferred which can make the transfer of large balances unattractive. There are, however, cards that have yet to introduce a balance transfer fee.

Watch out for the 0% transfer trap

Be wary too of buying anything else on the new credit card during the introductory interest-free period. If the interest-free period only applies to transferred balances, you could find yourself paying interest at the full whack on your new purchases. Most card issuers put your new purchase debt at the back of the queue when allocating your monthly repayments thus ensuring they're the last debts to be paid. It means your purchase debt keeps growing at a high interest rate until your balance transfer is paid off, which rather defeats the object of switching!

What to do when the deal's up

When your interest-free period is up, switch your remaining debt to a new balance transfer card and repeat until your debt is gone. However, be sure to apply for your new 0% card at least six weeks before the introductory period on the old card expires - it takes time for paperwork to be processed, balances to be transferred and for new cards and PINs to arrive in the post.

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