Are Credit Card Balance Transfers Here to Stay?

Do you remember the old days when credit card issuers charged a fortune and we had to pay for the privilege of having one of their credit cards?

It was only a few years ago that the average credit card APR was over 20% and we had to pay an annual fee to have one. However, as always competition is on our side and the entry of large US companies to the UK market saw battle begin. Large credit card issuers reduced their balance transfer rates to keep up with their US counterparts, until eventually came the birth of the 0% credit card. These days, most major card isuers offer a 0% card for balance transfers and annual fees are rarely charged.

Having a 0% interest credit card means that you will not pay interest on any credit card debt that you transfer to it, within a defined period. So your monthly payments, rather than being used to pay both balance and interest, will go solely to reduce your outstanding balance. This obviously allows you to pay off the debt much more quickly. For those who are struggling to get out of debt, 0% interest credit cards can provide an essential lifeline.

The longer the 0% interest period on a credit card lasts, the better and we've seen deals in the past with providers offering interest free periods for up to one and a half years! Unfortunately, those days seemed to be long gone, with deals for just six or nine months now the norm, some issuers are starting to charge a percentage fee for the balance transferred - so if you have a balance transfer plan apply for a balance transfer card asap.

However, providers are still competing for new customers and in a bid to offer the best deals while still making a profit, and have introduced a new charge: the balance transfer fee. An increasing number of providers are charging applicants a 2% fee (usually up to a maximum of £50) to move debt to their 0% cards, which clearly eats into the savings which can made. Consumers will need to do their sums carefully to weigh up which card suits them best. A 0% deal for nine months with no balance transfer fee could work out far better than a 12-month deal which does charge a fee. Generally speaking, the larger the balance you have to transfer, the more you will save, so a £50 fee will not sting someone transferring £25,000 as badly as someone transferring £2,500! However, it's important to remember to consider all factors when making your decision. And although balance transfer fees do appear to be being embraced by more providers, there are still plenty of 0% cards on the market that don't charge a fee.

So if you have a balance on your credit card, consider moving it to a 0% interest credit card. If you can pay it off within the specified time period you'll never pay interest on it, again!