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It may seem an obvious assumption to make - it's a credit card, why wouldn't it be suitable for using to pay for new purchases?
However, 0% balance transfer credit cards carry some of the most unscrupulous rate-traps you can find on a credit card – and there are quite a few!
Purchases can be a rate-trap...
The main potential rate-trap - the one used to lure unsuspecting customers into paying for "the champagne at the shareholders meeting" - of 0% balance transfer credit cards is the one thing you're most likely to do – is spending.
0% balance transfer credit cards and new purchases sometimes fail to go hand-in-hand due to the way the credit card company chooses to allocate your payments.
The allocation of payments clause...
In most cases, when you make a payment to your 0% balance transfer credit card account the entire amount will go towards the balance you moved over to the 0% rate - your cheapest balance.
While this may not seem like the end of the world - you want to clear your debts after all - what this actually means is that any balance created on your account through spending or withdrawing cash on the card effectively becomes ‘trapped’ behind your - probably rather large - 0% balance transfer.
The biggest downfall here is that any purchase or cash withdrawal you make will be subject to standard – or higher than standard in the case of withdrawals – interest rates right up until you manage to repay the last £1 of your balance transfer, or you get fed up of being ripped off and move it all over to a new 0% balance transfer credit card.
Make your 0% balance transfer credit card work for you...
For many people 0% balance transfer credit cards can provide a very effective solution when it comes to saving money on the extortionate interest rates charged on credit card balances.
If you have credit card balances on which you are being charged high rates of interest you can save yourself a small fortune in interest payments by transferring your credit card balance/s from other high interest credit cards to a 0% balance transfer credit card.
Although you may be charged a fee for transferring these balances, this can often prove to be far cheaper than continuing to pay interest on the balances.
You can then enjoy a specified interest free period with your 0% balance transfer credit card, which buys you time to repay your combined balance without incurring further interest charges.
Just remember to get a separate credit card, e.g. a 0% purchase credit card or low interest rate credit card, for any new spending you need to make. Alternatively, you could always go credit-free and use your debit card.
It’s a fairly hard-and-fast rule to always try to use a debit card for cash withdrawals, if you do need to withdraw cash or buy foreign currency on credit – look at getting a low cash advance rate credit card to try and save money on interest charges and handling fees.
I still want to transfer and spend on the same card... are there any exceptions?
There are a few exceptions – although they are quickly becoming as rare as no-fee-0%-balance transfer cards.
The exception to the rule are 0% balance transfer and purchase credit cards that offer a 0% interest rate on both balance transfers and new purchases for the same length of time.
Remember, even with a 0% offer suitable for both transferring to and spending on – cash withdrawals still create the same rate-trap and so ATM usage should still be confined to your debit card or another more suitable credit card.
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