A New Year has brought no promise of respite from the current financial crisis and the credit crunch appears to be still in full swing. With the financial forecast still pretty gloomy as we head into 2009, its chilly winds are affecting not just big business, but ordinary consumers as well. However, a new year opens up a new opportunity to take control of your finances and despite the doom-laden headlines there are still plenty of financial bargains to be had if you know where to look.
The number of 0% credit cards has shrunk noticeably in comparison to January of last year, with the credit card companies tightening up on their criteria and reducing their market exposure and the risk of potential bad debt. Despite this 'market readjustment' though, there are still bargains to be had with some banks and financial institutions even advertising 'Sales' in a bid to lure in discerning customers. Right now, it is very much a consumers market, and savvy customers can take advantage of a market thats eager to keep its share of the economy. There are still 0% balance transfer cards out there; admittedly they're harder to come by but they do exist. The major difference to last year is that credit card companies are being much more stringent in their definition of a 'good' customer, so it pays to check that your credit history is correct and up to date before applying for a balance transfer card. Even a slight discrepancy could scuttle your chances of successfully taking advantage of the tempting offers that are available. If you have a poor credit history, the first half of 2009 would probably be better spent in addressing this and making sure that when you do apply you have a better chance of being accepted.
There are a few things to take into consideration when looking at balance transfer cards. Firstly, be aware that you will be required to pay a transfer fee to move an outstanding debt from one card to another. This is normally around 3% of the total transfer, but some credit card companies have a minimum fee, regardless of the amount transferred. You need to include this figure in your initial calculations.
Not all 0% balance transfer credit cards offer interest free terms on purchases as well. This is where the golden rule of credit card balance transfers comes into force " never use the card for purchases as well. Keep it exclusively for balance transfers. The amount you pay each month will go to pay off the most recent transactions first, rather than your initial balance transfer. This means that you could end up running out of time on the 0% offer, with your monthly payments going to clear off recent purchases when they could be shrinking the size of your balance transfer instead. This could undermine the whole point of taking out a balance transfer card in the first place, as you may start paying interest before the debt is cleared.
Some cards offer two functions " 0% on transfers and 0% for the first few months on purchases. However, once the deal for purchases runs out, you may find that the payments you make go to pay off the interest on the balance transfer, rather than the existing outstanding purchases. This has come to be known as 'negative payment hierarchy'. This means your payments will be used to pay off the balances attracting the lowest interest rate first, and could mean that you end up paying the full interest charge on your purchases (usually in the region of 18%). If you do intend to make further purchases on your plastic the wisest move is to have two cards " one purely for the balance transfer and one for purchases.
If you are planning to transfer your balance onto a low or zero interest rate card, work out exactly how much you will be have to be paying each month to clear the balance before the interest kicks in. Factor into this any late payment charges that may be incurred, transfer fees and other fees such as insurance (which should be optional). By knowing your figures before you submit your application, you are taking charge of your finances from the outset, putting you in a much better position to weather the financial storm that is currently battering the economy. Even in the depths of a financial winter, smart consumers can still find monetary havens and credit card deals.
The number of 0% credit cards has shrunk noticeably in comparison to January of last year, with the credit card companies tightening up on their criteria and reducing their market exposure and the risk of potential bad debt. Despite this 'market readjustment' though, there are still bargains to be had with some banks and financial institutions even advertising 'Sales' in a bid to lure in discerning customers. Right now, it is very much a consumers market, and savvy customers can take advantage of a market thats eager to keep its share of the economy. There are still 0% balance transfer cards out there; admittedly they're harder to come by but they do exist. The major difference to last year is that credit card companies are being much more stringent in their definition of a 'good' customer, so it pays to check that your credit history is correct and up to date before applying for a balance transfer card. Even a slight discrepancy could scuttle your chances of successfully taking advantage of the tempting offers that are available. If you have a poor credit history, the first half of 2009 would probably be better spent in addressing this and making sure that when you do apply you have a better chance of being accepted.
There are a few things to take into consideration when looking at balance transfer cards. Firstly, be aware that you will be required to pay a transfer fee to move an outstanding debt from one card to another. This is normally around 3% of the total transfer, but some credit card companies have a minimum fee, regardless of the amount transferred. You need to include this figure in your initial calculations.
Not all 0% balance transfer credit cards offer interest free terms on purchases as well. This is where the golden rule of credit card balance transfers comes into force " never use the card for purchases as well. Keep it exclusively for balance transfers. The amount you pay each month will go to pay off the most recent transactions first, rather than your initial balance transfer. This means that you could end up running out of time on the 0% offer, with your monthly payments going to clear off recent purchases when they could be shrinking the size of your balance transfer instead. This could undermine the whole point of taking out a balance transfer card in the first place, as you may start paying interest before the debt is cleared.
Some cards offer two functions " 0% on transfers and 0% for the first few months on purchases. However, once the deal for purchases runs out, you may find that the payments you make go to pay off the interest on the balance transfer, rather than the existing outstanding purchases. This has come to be known as 'negative payment hierarchy'. This means your payments will be used to pay off the balances attracting the lowest interest rate first, and could mean that you end up paying the full interest charge on your purchases (usually in the region of 18%). If you do intend to make further purchases on your plastic the wisest move is to have two cards " one purely for the balance transfer and one for purchases.
If you are planning to transfer your balance onto a low or zero interest rate card, work out exactly how much you will be have to be paying each month to clear the balance before the interest kicks in. Factor into this any late payment charges that may be incurred, transfer fees and other fees such as insurance (which should be optional). By knowing your figures before you submit your application, you are taking charge of your finances from the outset, putting you in a much better position to weather the financial storm that is currently battering the economy. Even in the depths of a financial winter, smart consumers can still find monetary havens and credit card deals.
About the Author:
James Noon is a financial writer who enjoys breaking down financial and credit card jargon for the consumers. He writes for various popular websites. You can find out more about credit card balance transfer here.
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