Using Balance Transfer Cards after the Holidays

With Christmas and at least some of the sales behind us, peoples credit card balances are feeling the strain. According to the latest figures more than four million people plan on transferring their credit card balance to a new card in order to take advantage of zero interest introductory offers. If you are suffering a financial hangover from the festive season then a balance transfer can be an effective way of getting back on track. The average borrower plans to move $1,140 this month which is a significant sum but well down on last year’s figure. In a sign that the nation is trying hard to pay off its unsecured debt the average sum has halved from $2,290 last year and as a result our collective transfer will reach $3.2 billion compared against last year’s $7 billion.

Credit card lenders are prepared to take borrowers’ existing debts on to a zero per cent introductory offer which can last from as little as three months right up to as much as 16 months. They charge a fee based on the amount you are transferring. Their generosity is based on the assumption that many of those who transfer their debt will either fail to pay off the cash before the deal expires or will take on new debts following the deal so it’s not a completely altruistic offer. Anyone planning to transfer a debt can expect to pay between two and a half and three per cent charge on their debt. So anyone moving $1,140 to a new card will face a charge of roughly $34. If you do fail to pay off your outstanding debt before the introductory rate expires then the rate of interest you’ll pay will jump from nothing to around 16%. That means a $1,000 balance will start to cost you around $160 a year.

Having been there myself, your best bet might just be keeping the card you already have and making more then the minimum payment if possible. Even an extra $50 per month can make a huge difference. Balance transfer cards are really wolves in sheep’s clothing. So be careful, if you must get one, use it to strictly “pay off the original balance,” and nothing else. Do not continue to use the card for purchases.