by Harry Lacey

Created on: March 06, 2009   Last Updated: March 31, 2009

Why a balance transfer card is not necessarily right for everyday spending

Balance transfer cards are a great way to manage your credit card debt. Put simply, they offer low rates on money transferred to them from other cards. So if you've got bad debts gathering interest on one or more purchasing cards, you can shift those debts onto the balance transfer card, safe in the knowledge that you'll be paying 0% for a decent length of time. A lot of consumers rely on them, 'shuffling' their debt between new balance transfer cards in order to avoid paying lots of interest and to give themselves time to pay the money back. Used cleverly, they can prove to be invaluable, and many people kick themselves for never having used one in the past. As long as your credit score is high enough to get accepted for new cards, there's no reason why you can't keep shifting money between credit cards, avoiding have to service the interest on old debts. So balance transfer cards work for moving payments and keeping costs down. But are they good for everyday use? No.

Unfortunately, they aren't the miracle solution they sometimes come across as. Essentially, they are called balance transfer cards because that is all they are for, and a lot of credit experts will tell you that the golden rule for using them is never spend on them after you have transferred money. It may not seem like it makes much sense, but it does. Basically, the card offers differing interest rates for different transaction types. After you move a sum of money to a card, you are charged 0% interest on that amount, and are obliged to pay it off first. After the designated amount of time the 0% interest rate will end, and if you have kept spending you'll be obliged to pay what is normally a very high rate on purchases. Debt accrued on the card after the balance transfer keeps accumulating interest until you have paid off the original transfer amount, which can lead to big problems for the borrower. Taking the time to compare credit cards and searching for the best credit cards can make a big difference, as in many cases the disparities between introductory rates and purchasing rates differ from company to company. Take Abbey's balance transfer card for example. For a 3% fee, Abbey will give you fifteen months 0% on balance transfers. The standard rate, however, is 15.9%. This certainly isn't the highest you'll find by any stretch of the imagination, but if you have debt that is effectively locked at that rate for as long

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