0% Balance transfers

Some lenders offer credit cards with a 0% balance transfer fee and an interest-free introductory period whereby you can switch the debt on your current credit card to a brand new account without charge, and then avoid paying interest on your outstanding balance for a set period. Some issuers even allow you to transfer other types of debt, such as overdrafts and loans to a 0% deal.

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This might sound a little too good to be true, and in a lot of cases it now is, with a number of lenders charging a fee of between 2-5% of the amount transferred to deter people from lumping all of their debts into an account with them just to take advantage of the interest-free introductory period then closing the account in search of another free balance transfer once the interest-free period is up. If this sounds like a good idea to you, then you should really think before you commit yourself to a life of avoiding your debts.

There are still lenders out there that are offering 0% balance transfers though, and a chance therefore to save a great deal of money. An interest-free period allows all of your hard earned money that you hand over to go straight towards paying off your debt as opposed to going towards paying the interest for the privilege of being in debt. When the interest-free period can be as much as a year, this can save you a substantial amount and give you a real chance of clearing your debts.

You must be very careful though when applying for a new credit card and ensure that you understand exactly what you are getting. Introductory interest-free periods often only apply to the balance transferred, which is great in that it gives you a fresh start (freezing your debt so it cannot accrue interest) but, there is a good chance you will be expected to pay full interest on any new purchases.

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