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Credit Card Companies Battle for Balance Transfers

With the credit crunch a thing of the past, many credit card providers are battling it out in order to win customers with many dangling the tempting offer of 0% interest on balance transfers as the incentive to get the public to switch their account.

Cards offering a 0% balance transfer facility are undoubtedly a very useful tool to help proactively manage finances, there are some pitfalls which should be avoided in order to make the most of the deals in the market.

Cards offering 0% interest rates on either purchases, or in this case, balance transfers, cannot sustain this forever and many offer this rate for an introductory period only.

If a customer switching their account is able to repay their borrowing whilst the discounted rated applies, the move could save substantial money but for those whose debts take a bit longer to pay back, they may find themselves paying a higher whack of interest than with their previous card provider. It is very easy to become dazzled by the idea of paying no interest on existing balances and this can mean that many people fail to check the interest rate that the card reverts to once the interest free period ends.

Even if card has a higher than average interest rate once the offer finishes, it doesn`t mean it isn`t worth transferring the balance. However, it does mean that a concerted effort should be made to pay off the debt prior to the 0% interest period expiring or else find another card to switch to.

Whilst there is no interest chargeable when you transfer an existing balance, there is a one-off fee which is normally payable, which typically is around 3% of the total debt. It is worthwhile calculating how much this fee is likely to add up to and then comparing this to the interest which you would pay by sticking with your existing provider. In some cases, it might not be financially beneficial to switch cards, despite the deal on offer.

Another part of the small print that many customers are unaware of is the card provider`s right to terminate the 0% offer if any part of the contract is violated. This means that if you go on holiday and forget to pay your bill before you leave, when you return you may find that the card provider has cancelled the 0% offer and switched the balance onto its normal interest rates, as well as adding a fee for late payment. It is therefore absolutely imperative to ensure that you stick to the terms and conditions to prevent being heftily penalized.

The competition in the credit card market is undoubtedly to the consumers` benefit, with providers no longer limited to high street banks. It is now increasingly common to find retailers in the industry, with either a Tesco credit card or Marks and Spencer credit card often seen in wallets and purses around the country. These cards can often be very competitively priced and comparison websites can help to identify the providers offering the best deals.

Related Information:

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