How a balance transfer card could help save you THOUSANDS when paying off debts – but you’ll need to hurry
BRITS with hefty credit card balances are throwing away thousands of pounds by not switching their debt to a balance transfer card.
New figures released today by UK Finance revealed a whopping £1.62billion of transfers took place in January - the highest level since March 2006.
Balance transfer cards lets you shift your existing debt to a new card without paying interest so you can clear your balance more quickly and cheaply.
But money experts are warning that while borrowers are still keen to move their debt around, the longest deals on the market are starting to be trimmed back.
Andrew Hagger of the Moneycomms website said Barclaycard has become the latest lender to cut back its headline balance transfer offer from 37 to 36 months.
That means only two providers, MBNA and Nuba, are offering 37 months interest free - but a year ago there were 11 major credit card firms offering 0 per cent periods of 40 months or longer.
Balance transfer cards: What you need to know
SHIFTING your balance can be a great way to cut the cost of your debt. But you must use them properly so you don't just add to it.
Always clear your debt - Credit card firms don't offer these deals out of the goodness of their hearts. They rely on you not clearing your balance by the time the 0 per cent deal comes to an end so it can start charging you interest.
Always make your payments - If you don't keep up with your monthly payments, you could lose the 0 per cent offer and start being charged interest. Always try and pay-off more than the minimum payment too to clear your debt quicker and don't spend on the card either.
Check your deal - Like with all credit cards, you might not be offered the headline deal if you don't have the best credit history. Use to see what deals you are likely to be accepted for.
According to Mr Hagger someone with a £1,000 balance on a typical credit card could save £98 in interest payments over a year if they switched to a balance transfer card and £293 over three years.
Someone with a significant balance of £5,000 would save a whopping £488 in interest over 12 months and an eye-watering £1,465 if they switched to a card that offered a 36-month 0 per cent period.
He said: "Credit card companies are tightening their criteria and the appetite to be top of the long term best buys has faded dramatically.
"There were 679,000 transfers made in January, so the level of demand from consumers is showing no sign of decline.
"There are some excellent card details still available if you have a good credit rating but don't hang around as such stand out deals won't be around for much longer."
Back in November, MoneySavingExpert's Martin Lewis, gave a similar warning and urged Brits to take action if they wanted to take advantage of lengthy 0 per cent offers.
The Sun Online has taken a look at the longest balance transfer deals on the market and what you need to be aware of when it comes to shifting your debt.
More on money
There are increasing concerns that UK households are carrying far too much debt.
Back in October, boss of the Financial Conduct Authority (FCA) Andrew Bailey slammed credit card companies for not doing enough to help the five million consumers struggling to pay their bills.
The watchdog is thinking about introducing new rules which could see those struggling the most have their card charges reduced or wiped completely - saving a potential £1.3billon a year.
HOW TO CUT THE COST OF YOUR DEBT
BEING in large amounts of debts can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
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