Are you considering taking up a credit card or bank offer for nil interest on your debt balance transfer? If so, BEWARE of other charges and interest fees that are cleverly not included in the attractive marketing spiel BUT hidden in the small print, usually in the terms and conditions that they expect you to find yourself on the internet. If you don’t do all your figures carefully first, you may be worse off. And if you return to the provider to bring this to their attention, they will confidently assure you that everything was fully disclosed in their terms and conditions. You will be stuck with the result.
Although this type of debt management can work well for you, it is imperative you look at the big picture to be certain that the end result is actually in your favour, not the banks or credit card providers. Remember, the intention by the provider is to lure you from another provider to become their customer. This is done with the view to make them money in the long run, not out of the goodness of their heart.
So, to return to an old but solid phrase – “Buyer Beware”. If considering transferring your debt to an interest free offer, please consider the following tips first:-
- If you are going to transfer to your existing card or account, you will probably lose the interest free period on your new purchases so, if you normally pay your credit card debt in full each month by the due date to avoid interest, this will no longer work. Try to estimate your average monthly spend to calculate the additional interest you will be incurring each month and remember, if you make any additional big purchases during the repayment term full interest charges will accrue from time of purchase
- If you are opening a new card or account you will incur additional fees, possibly monthly and annually. Make sure you aware of all fees as some are not mentioned up front but added on as administration type fees (such as a statement fee, handling fee, paper fee, service fee, payment fee, etc etc). These vary between providers and can be quite high. Even if not high, they add up when charged regularly. You will need to add these fees onto your repayments
- Be absolutely sure you will be able to pay off the debt balance within the required time as interest rates will revert to normal or possibly higher rates at the end of the agreed term
In short, certainly consider this option as a good method of debt management but firstly compare what your total interest cost will be without transfer to the additional interest you will incur on current purchases (if you use or continue to use the account that you transfer your debt to) and the additional fees you will be paying. You might be surprised that transferring your debt to an ‘interest free solution’ may end up costing you more in the long run.