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Balance transfer promotions can be a great way of saving yourself huge amounts of money in interest charges, while offering you the time to get back on top of your finances and start repaying your outstanding balances.
However, credit card companies like balance transfer promotions too; they bring in new customers and recently they have started making a lot more money out of a 0% rate than you would think.
With sneaky tricks and confusing terms and conditions, balance transfer promotions have become a financial minefield of hidden pitfalls and trap-in's.
But the end is not lost! Use your balance transfer credit card wisely and you can start saving yourself money instead of lining the pockets of your credit card issuer.
1. Don't use your balance transfer credit card for purchases - unless it also offers 0% on purchases for the same length of time
If the 0% period on purchases ends before the 0% period on your balance transfer, any purchases left outstanding at the end of the 0% purchase period will start accruing interest charges, and because of the 'allocation of payments' you won’t be able to repay them until you have first repaid your 0% balance transfer in full.
If the balance transfer credit card doesn't offer any promotional purchase period, then any purchases you make will be subject to interest charges and you won't be able to repay them until you have repaid your balance transfer in full first.
But what if I need to make purchases too?
There is a safe option, make sure you get a 0% balance transfer credit card that offers 0% on purchases for the same length of time, and you can spend freely knowing that you won't be charged interest on your purchases until your 0% balance transfer period has ended anyway.
2. Don't use the card for cash transactions
Cash transactions made on a balance transfer credit card will be subject to higher interest rates and fees, and you won't be able to repay these transactions until you have first repaid your balance transfer in full.
Unfortunately, there are no balance transfer credit cards that are also safe for cash transactions. So remember to use your debit card or get a separate low rate cash transaction credit card.
Tip: Cash transactions include cash withdrawals, getting 'cash back' at the supermarket, buying foreign currency or traveller's cheques and now also include gambling transactions and any transactions made at a casino.
3. Balance transfer handling fees
Sadly, balance transfer handling fees are becoming harder and harder to avoid these days.
However, you can still find balance transfer credit cards that offer a capped maximum fee, which will save you money if you are transferring over £2,500.
And although a very small minority, there are still 'fee-free' balance transfer credit cards in existence.
4. Transfer your balance during card application - or as soon as your account is opened
Make the most of the balance transfer period by transferring your balance when you apply for a balance transfer credit card, as soon as you can.
Not only will you benefit from 0% or lower interest rates sooner, but many balance transfer credit cards require you to make the transfer within a set time period, which can be as short as 30 days, to qualify for the promotional rate.
5. No interest doesn't mean no payments!
It's important to always make at least the minimum payment on your outstanding credit card balance each month, even if you are on a 0% promotional rate.
Missing a monthly payment may mean that your promotional balance transfer rate is withdrawn, and your outstanding balance will return to the standard interest rate, which can be as much as 17.9% p.a.
6. Know when your promotional balance transfer rate ends
Set a date in your diary for the end of your 0% balance transfer period.
If you are planning to re-move your balance transfer you should do it within 30 days of the end of your promotional period to avoid any interest charges when the 0% period ends.
7. Read the small print and watch out for any 'purchase requirements'
Those staggeringly long 18-month balance transfer deals, aren't quite what they seem. They require you to make a purchase to get the full balance transfer term, which is a very sneaky trick. Your purchase will be charged interest and you won’t be able to repay it until your 0% balance transfer is repaid first. Simply put, your '0% deal' is now costing you interest!
Some 0% deals require you to make a purchase to get the full 0% balance transfer term. Watch out, this is a very sneaky trick, your purchase will be charged interest, and you won't be able to repay it until your 0% balance transfer is repaid first. Simply put, it’s no longer 0%.
8. Don't be tempted by rewards
When looking for a balance transfer credit card, just look for a balance transfer credit card.
Sounds silly doesn't it? However, many balance transfer credit cards will try and tempt you with earning rewards, thus making you spend money on purchases... resulting in interest charges on your purchases which you'll be unable to repay until your promotional balance transfer is cleared first. (Unless the balance transfer credit card offers the same promotional deal on purchases - same rate and same length).
9. Make sure you get the right balance transfer deal for you
If you are planning on moving your balance from one 0% deal to the next, you may eventually fall into problems.
While it can work for a while, sooner or later you'll either run out of 0% deals or you may find you start getting turned down for 0% balance transfer credit cards.
If you want longer than 1 year to repay your outstanding balance, you may be better getting a fixed for life balance transfer deal, which offers a low interest rate until you have repaid your balance transfer in full.
10. Watch out for annual fees
If you are just getting a credit card for a balance transfer (which ideally you should be), try to avoid cards with annual fees; it'll only serve to be an added cost.
And finally...
Compare, compare, compare...
You wouldn't take out the first mortgage you were offered, so the 3-appointment rule serves for credit cards too. Compare at least 3 offers before you settle on the balance transfer credit card for you.
Show me all credit cards offering:
0% balance transfers
Life of balance transfers
Fee free balance transfers
 Credit card guide
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