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You can’t afford NOT to try a balance transfer.
This is a bugle call to anyone paying interest on existing credit card debt … CARDE DIEM (um, grab a top card today).
That’s because, for the first time in a while, a slew of lenders are once again vying for the top of the balance transfer tables – which means your chances of one of them accepting you have increased.
A balance transfer is your main weapon
A 0% balance transfer is where you apply for a new card to pay off existing credit or credit card debt for you, so you owe it the money instead, but it’s interest-free. This means that more of your repayments clarify what you owe, rather than just covering interest, so you get rid of debt faster. Here’s what you need to know:
You usually have up to 60 or 90 days after the request to sort this out. Although it’s easier if you do it as part of the app.
Acceptance is the challenge, but the demands hurt your creditworthiness. Apply for the card and it will mark your credit report, so you don’t want to apply unless acceptance is assured.
Use an eligibility calculator to find out which cards will accept you. It’s like a credit matchmaker – it’ll show you which cards you’re most likely to get. This is done via a “soft credit search” which means that only you see it on your credit report – lenders cannot – so it does not affect your ability to obtain future credit, helping you find the right menu with a minimum of demands.
Some companies offer this for their own cards, or you can use my site www.moneysavingexpert.com/EligibilityCalc which shows your odds of getting most of the best cards, all in one place.
Check if you will definitely get the full length of 0%. Some cards offer lengths “up to” 0%, which means not everyone hits the jackpot – this is stated in the summary box.
For example, at the time of writing, among the 29 month 0% cards, Sainsbury’s has the lowest fees, at 2% – but it’s a ‘up’, so some accepted will only have 21%. month. Still, HSBC and M&S Bank give all accepted customers the full 29 months of 0%, albeit for a higher fee of 2.75% – it may be worth it if the eligibility calculator shows you have decent chances.
If you have a choice of multiple cards, go for the lowest fees within the time frame you need to pay off. Most cards charge a one-time fee that is a percentage of the debt transferred.
There is a range of cards up to 29 months at 0%, but for these you will pay a fee of around 3% (£ 30 for £ 1,000). Santander offers the longest free card, at 18 months.
There are “bad credit” balance transfer cards. For example, Capital One gives some with past credit problems 9 months 0% with a 3% fee. But that’s a horrendous 34.9% APR afterwards – so only move what you can comfortably clear before the 0% runs out.
Low chances of eligibility do not always mean “do not apply”. A 50% chance means that half of the people in your situation will be accepted. And although 10% seems very low, it still means that one in ten applicants will be successful.
So if this is your best chance and it is your senior credit (i.e. you are not about to apply for a mortgage or similar), a rejection of your credit report doesn’t matter too much. The reason for protecting your credit history is so you can make the most of it when needed – and paying off your debt is your most pressing financial need.
Is your credit limit not high enough? Take what you get and try again. If you apply, you are accepted, but the credit limit is not high enough to transfer all of your debts: the application is in your file, so you can also transfer most of the debt to the APR on higher possible towards the new card. Then see if you have a decent chance of getting another card.
If you have serious debt problems, there are people you can call
In serious debt? Instead, seek free help. I have three questions for you. A) Are you having trouble making the minimum monthly payments? B) Does your total debt (excluding mortgage and student loan) exceed one year’s salary? C) Do you have sleepless nights or debt depression / anxiety?
If you said yes to any of them, skip the solutions above and instead get free personalized debt counseling help from www.citizensadvice.org.uk, www.stepchange .org or www.nationaldebtline.org. And if you need emotional support, try www.capuk.org.
They are there to help, not to judge. The most common thing I hear after is, “I finally had a good night’s sleep.
If you get a card, always follow the GOLD rules
Getting the right card is just the starting point. In order for this to work, you must strictly follow the recipe, otherwise it may leave a bitter taste.
Write off the debt or re-transfer before the 0% end or you will pay the 20% ish APR in interest.
Never miss the minimum monthly repayment or you can lose the 0%. It’s best to set up direct debit for the minimum payment for safety – and manually pay more and more if you can.
Do not spend / withdraw money on the card. It is usually not at the cheap rate.
Do you have several debts? Pay off the highest APRs first. Some people try to pay off their biggest debt first or spread the payments evenly. However, it is the debt with the highest APR that grows the fastest, so it is the priority. Concentrate all the money available on this one, paying only the minimum on all the others. Once that’s clear, focus on the next highest APR and so on.
Martin lewis is the founder and president of MoneySavingExpert.com. To join the 7.5 million people who receive their free weekly Money Tips email, visit www.moneysavingexpert.com/latesttip
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