A MARTIN Lewis fan has shared how he saved £1,300 on debt repayments thanks to a clever tip.
Balance transfer credit cards are a great idea if you have debt spread across a few different cards or if your interest rate is high.
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These let you move the balance from other cards onto a new one, and typically you pay no interest for a set period.
This means you debt is easier to manage because it’s all in one place.
In the latest MoneySavingExpert (MSE) newsletter, Martin Lewis fan Adam shared how he used the website’s free balance transfer eligibility tool to find the best card for him.
He applied and was offered a card with a credit limit of £3,500 with interest-free balance transfers for two years.
Adam’s debt was costing him 20% interest, and he estimates that he is set to save around £1,328 over the interest-free period.
How does a balance transfer credit cards work?
If you have credit or store card debts debts that are gaining interest you can move the money you owe onto the card.
That means you can focus on repaying the debt, rather than the amount added in interest, and it can help you get back in the black faster.
But it’s important to note that you can’t transfer a balance between cards from the same bank.
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You can usually apply for a balance transfer credit card online or on the phone, and banks may be able to help in-branch.
To make an application, you will need to provide your name, address and an email as well as details of your income so a provider can assess your eligibility.
You will also need to provide details of how much money you want to transfer to the new card, but you can often do this after you have been accepted.
Applicants need to be over 18.
If your application is approved, you will need to transfer the balances within a set period, usually around 60 or 90 days.
Your old balance will then be cleared and you can start making interest-free repayments on your new card.
There are lots of different approaches to clearing your debts, including the snowball method which involves repaying the smallest first.
How to find the best deals
According to MSE, the best cards currently available include one from Sainsbury’s Bank, which charges no interest for up to 30 months.
But it does charge a 2.89% or 4% transfer fee.
The charge will depend on the offer available at the time.
So, if you move across £3,000 you’d pay either £86.70 and £120.
M&S Bank as the longest definite 0% period of 28 months.
This means that anyone who is accepted can be certain of getting this this.
The bank charges a 2.99% fee – so you’d pay £89.70 if moved £3,000 across.
If your credit score isn’t great, then Virgin Money offers a 16 month interest free with a 3% transfer fee.
You would pay £90 if you transferred over £3,000.
Know the risks
Not using a credit card effectively, can wreak havoc on your finances and your credit score.
If you don’t keep up with repayments or default on your debt, you are likely to get a black mark on your credit record, which could affect your ability to get a credit card, loan or mortgage in the future.
It’s important not to let yourself get sucked into overspending just because you’re earning points or cashback – spend as usual and always clear the full balance as soon as possible.
And don’t bank on being approved for a card or getting the 0% deal you’d hoped for.
Card providers only have to give the advertised rate to 51% of applicants, so you could end up paying more interest than you bargained for.
If you’ve got a poor credit record, you’re less likely to get the best rates.
And if you are looking for a new credit card, don’t apply for lots at once.
