Balancing the books
The impact of the infamous 'Credit Crunch' of 2008 still has a grip on the UK economy as we head into 2009. The financial forecast is peppered with warnings of further downturns and of hard times ahead, particularly for customers with outstanding debts on credit cards. But a New Year can give you an opportunity to hunt down a bargain that may help you weather the financial storm a little easier and guide you into smoother monetary waters.
Tempting 0% offers on credit cards have been noticeable by their absence this year as credit card companies tighten their belts in anticipation of another lean year. But they are out there, with some banks even joining in the frenzy to tempt wary high street customers into their branches with 'Sales' on financial services, including balance transfer credit cards. The smart consumer can take advantage of this desire to please by the credit card companies and snap up a bargain on balance transfers. Many credit card companies are now reducing their exposure in the marketplace by only accepting customers with very good credit histories. Any small blip on your record could stop your chances of taking advantage of the few 0% offers that are available, so a worthy New Years resolution might be to check your credit history records. If there are any discrepancies on your record (even something as insignificant as an incorrect postcode) they could affect your ability to gain credit. By checking that all your details are correct and up to date, you have a far better chance of taking advantage of the offers that are available.
There are a few things to remember before you apply for a credit card balance transfer offer. You will be required to pay a balance transfer fee, usually around 3% of the total amount transferred. Some cards have higher rates than others, so again it pays to search the market before deciding on your best option. Some credit cards have a minimum fee, regardless of how small the transfer. If you are only looking to transfer a small amount onto a new card, a minimum fee could make the process much more expensive than it needs to be.
Not all 0% balance transfer credit cards are interest free for purchases as well. There is a mantra that anyone thinking of transferring balances between credit cards should learn " never use a balance transfer card for purchases as well. The amount you pay each month on your new card will go to pay off the most recent transactions (your purchases) rather than the initial balance transfer. If you treat the card as you would any other credit card, you may find that the interest free period has slipped by unnoticed and youre suddenly paying interest on the balance transfer anyway " negating the whole point of carrying out a balance transfer in the first place.
Some cards do offer dual functions " 0% on balance transfers and 0% (usually for a much shorter period of time) on purchases. However, once the purchases deal runs its course, you may discover that the payments you make go to pay off the balance transfer, rather than the interest on outstanding purchases. This is known as 'negative payment hierarchy', with payments being used to clear the balances attracting the lowest interest rate first (the remaining time on your 0% balance transfer) and not your recent purchases. This could result in customers paying the full interest charge on purchases (usually around 18% but some can be much higher). It's the polar opposite of the previous conundrum, but still reinforces the adage " keep your balance transfers and your purchases on separate cards.
If you are planning to transfer your balance onto a low or zero interest rate card, work out exactly how much you will be have to be paying each month to clear the balance before the interest kicks in. Factor into this any late payment charges that may be incurred, transfer fees and other fees such as insurance (which should be optional). By knowing your figures before you submit your application, you are taking charge of your finances from the outset, putting you in a much better position to weather the financial storm that is currently battering the economy. Even in the depths of a financial winter, smart consumers can still find monetary havens and credit card deals.
Tempting 0% offers on credit cards have been noticeable by their absence this year as credit card companies tighten their belts in anticipation of another lean year. But they are out there, with some banks even joining in the frenzy to tempt wary high street customers into their branches with 'Sales' on financial services, including balance transfer credit cards. The smart consumer can take advantage of this desire to please by the credit card companies and snap up a bargain on balance transfers. Many credit card companies are now reducing their exposure in the marketplace by only accepting customers with very good credit histories. Any small blip on your record could stop your chances of taking advantage of the few 0% offers that are available, so a worthy New Years resolution might be to check your credit history records. If there are any discrepancies on your record (even something as insignificant as an incorrect postcode) they could affect your ability to gain credit. By checking that all your details are correct and up to date, you have a far better chance of taking advantage of the offers that are available.
There are a few things to remember before you apply for a credit card balance transfer offer. You will be required to pay a balance transfer fee, usually around 3% of the total amount transferred. Some cards have higher rates than others, so again it pays to search the market before deciding on your best option. Some credit cards have a minimum fee, regardless of how small the transfer. If you are only looking to transfer a small amount onto a new card, a minimum fee could make the process much more expensive than it needs to be.
Not all 0% balance transfer credit cards are interest free for purchases as well. There is a mantra that anyone thinking of transferring balances between credit cards should learn " never use a balance transfer card for purchases as well. The amount you pay each month on your new card will go to pay off the most recent transactions (your purchases) rather than the initial balance transfer. If you treat the card as you would any other credit card, you may find that the interest free period has slipped by unnoticed and youre suddenly paying interest on the balance transfer anyway " negating the whole point of carrying out a balance transfer in the first place.
Some cards do offer dual functions " 0% on balance transfers and 0% (usually for a much shorter period of time) on purchases. However, once the purchases deal runs its course, you may discover that the payments you make go to pay off the balance transfer, rather than the interest on outstanding purchases. This is known as 'negative payment hierarchy', with payments being used to clear the balances attracting the lowest interest rate first (the remaining time on your 0% balance transfer) and not your recent purchases. This could result in customers paying the full interest charge on purchases (usually around 18% but some can be much higher). It's the polar opposite of the previous conundrum, but still reinforces the adage " keep your balance transfers and your purchases on separate cards.
If you are planning to transfer your balance onto a low or zero interest rate card, work out exactly how much you will be have to be paying each month to clear the balance before the interest kicks in. Factor into this any late payment charges that may be incurred, transfer fees and other fees such as insurance (which should be optional). By knowing your figures before you submit your application, you are taking charge of your finances from the outset, putting you in a much better position to weather the financial storm that is currently battering the economy. Even in the depths of a financial winter, smart consumers can still find monetary havens and credit card deals.
About the Author:
Financial writer James Noon writes for various popular financial-based websites. He specialises in breaking down financial jargon for the regular consumer. You can find out more about credit card balance transfer here.
posted by Credit Counseling at
12:19 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home