How to Compare Balance Transfer Credit Cards
Steps to Take to Get the Best Out of 0% Balance Transfers
Sep 21, 2009
Most people looking at credit card balance transfers want to deal with existing card debt. Transferring money that is currently owed on other cards to a new deal can save money and help them clear what they owe. Getting a 0% offer, for example, can give an individual time to repay their debt and to put interest charges on hold while they do so. But, not all deals here are the same. A consumer that takes time to think about what they need and to compare costs may well find the best solution.
How to Work Out Which Balance Transfer Deal Is the Best
Although most balance transfer deals work on the same principles, each consumer will have their own circumstances to consider. If the aim here is to pay off existing borrowing then the consumer needs to consider:
- How much they have to pay off from existing cards.
- How much the transfer fee/administration cost will be.
- How long the 0% deal will last for.
- Which interest rate will be charged once the deal runs out.
In an ideal world the consumer will get a deal that gives them enough time to comfortably pay off their existing card debts together with the set up cost they will be charged (if applicable). So, to make a start, it may be worth looking at what they will need before they choose a deal.
The easiest way to do this is for the individual to:
- Total up existing credit card commitments and add any fee costs to them.
- Work out how much can be comfortably spared each month to go towards repayment.
- Divide the total debt by the estimated monthly repayment amount to get a clearer idea of how many months they will need a balance transfer for to become debt free.
So, if the calculation here shows that the individual will be able to repay what they owe in 12 months, then they will know that they ideally need a deal of this length. Anything over that timescale will be fine, anything below it may need an alternative solution.
How to Deal With Debts That Exceed Standard Balance Transfer Time Limits
For some, one balance transfer deal will not give them enough time to repay everything that they owe. If a calculation shows that this will be the case then another comparison factor comes into play. In this case, the consumer needs to consider the interest rate that will be charged on the card when the deal runs out. This may be higher than that given to a standard credit card and, as soon as it is applied at the end of the transfer offer, it will add interest to any money that is outstanding.
Some consumers will simply take their transfer deal and throw as much money as they can into their repayment pot every month to reduce their debt. They will then, at least, have made some in-roads into paying off what they owe and may feel more comfortable managing what is left over in the future. Others will simply start to look for another balance transfer deal when the first one comes close to its end. Often known as "rate tarting" this involves moving from deal to deal until all of the existing debt is repaid.
How to Find the Best Balance Transfer Offers
The easiest way to move forward now is to use an online credit card rate comparison site. These sites bring together deals and offers and looking at a couple will give the consumer an instant view of which deals may suit them best and which will be the most cost effective.
Consumers looking to repay debts with a credit card balance transfer deal should look at the terms of any offer before they apply. Bear in mind that it is essential to make at least a minimum repayment every month in good time. Failure to do so could invalidate the deal and see the card revert to its standard rate.
Finally, these deals will only really work if the individual commits to paying off as much as they can every month. Getting this kind of interest free breathing space can cause further debt problems for many so it is important not to give into the temptation to carry on spending.
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