by Julie Wood

Created on: March 08, 2009   Last Updated: March 01, 2011

Balance transfer credit cards can be a very tempting proposition. They often appear to be a great solution to a persistent debt problem. Carrying a large balance at a high rate of interest on any card can be expensive. Transferring that balance to a credit card that offers a substantially lower interest rate can save hundreds of pounds over a relatively short period of time. However, they are not always the best credit cards to then continue to use everyday.

Balance transfer cards, often offer an incredibly low interest rate on balances transferred onto the card from  existing credit cards, sometimes as low as 0%. However, they are not without their pitfalls and you have to be careful of the catches that may make using these cards expensive.

The tempting low interest rate may well be only an introductory rate that applies just for a short length of time. Once this introductory rate has expired, the interest rate often resets to a rate that is substantially higher. It may in fact be an interest rate that is even higher than the average credit card rate. Always read the fine print. Be sure that you fully understand the maximum time that the low teaser rate applies for, and how high the rate will be at the end of that period.

In addition to skyrocketing rates after the initial teaser rate expires,there can be other "gotchas" Make sure that the new low rate also applies to ongoing purchases. All to often they have a separate rate entirely. A much higher rate, that makes the on going use of the card shockingly expensive. It is essential that the terms and conditions are fully understood

Balance transfer cards can still be a great way to speed up the repayment of your balances. For example if you are carrying a 2000 balance on your existing credit card and the interest rate is around the national average, say 17%, It will cost you 340 over a year just in interest. If you transfer to a Zero rate card, all that interest can now be applied to reduce your capital and allow you to reduce your debt much faster.

It is essential that you realize that the interest rate is only a part of the true cost of a balance transfer. In addition, make sure you are aware of any annual fee that is attached to the card. These fees can be in excess of 100. Also make sure you fully understand how the fees are calculated for each balance transfer. Usually a percentage of the amount transferred will be charged when the transfer is made. There is often a maximum charge, making larger transfers

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