Who's better off on a 0% balance transfer, you or the credit card provider?

Mike Thomas head of debtwizard.com and his team provide advice on debt problems to Officers and support staff. He has clients in more than 80% of the nation's Police Forces as well as in the Prison Service, M.o.D., Fire Brigade, Ambulance Service and in other Public Service Departments. He regularly features on TalkSPORT and BBC radio as well as BBC television news.

If you are thinking of transferring your credit card balance to another card provider at 0% interest ask yourself, 'am I really going to get a good deal?' In an increasingly competitive credit card market companies need to maintain their profits and they do this even with 0% balance transfers. Here, Mike Thomas head of debtwizard.com, explains the finer points of credit card deals and how to avoid the pitfalls.

The balance transfer fee

This can be anywhere between 2% and 5%, and is often labeled an 'admin fee' It is quite costly if you have a small balance which you intend to clear quickly, in which case you could consider going for a 'short term no balance transfer fee' deal. For large amounts it is important to have a long period on the 0% rate and then the balance transfer fee becomes less significant.

The cash advance

This is an expensive way of getting cash as some companies will charge very high rates of interest. Remember, this debt will be added to the end of what has to be repaid on the balance transfer. If you think you are paying 0% interest on this cash advance then think again. This cash withdrawal could attract in excess of 26% interest and is usually repaid once you have cleared the balance you previously transferred.

The Holiday/Foreign transaction

Last year the banks earned more than £630 million in foreign transactions. No wonder credit card providers view these dealings with glee!

You could be charged between 2.75% and 2.9% on every transaction made abroad and in some cases, in addition, a cash withdrawal fee, together totaling 5.75% or more.

To avoid these extra charges use a zero interest rated credit card which allows free use abroad and free withdrawals.

Why you must make that first payment on the balance transfer deal

You need to set up a direct debit with the credit card company to pay at least the minimum amount in time to make your first payment. If they delay it, and it is in their interest to do so, and it does not get paid then you will be charged the £12 fee for late payment as well as the balance transfer fee - 3% on £6,000 - £180! You could also find that the special introductory offer has been withdrawn.

Not all credit card companies operate in this way but I have had a number of clients caught out by this technique and they have also ended up paying interest on the balance before they can arrange another card provider. To avoid this happening and for peace of mind, consider making the first payment manually, in plenty of time.

Manipulating the debt on your card

This is where the most expensive part of the credit card debt is put at the end, so it gets paid last. This is achieved by offering a rather long transfer deal, tempting you with a short term new purchase offer designed to encourage you to spend on the card as well.

Any payments you make will go towards the balance transfer first and if this is still outstanding when your introductory offer has ended then it could attract an interest rate of between 15% and 20%.

You can avoid this by selecting a card offering the same transfer deal on balance transfers and new purchases or better still don't take up the purchase offer and use a different card for any new purchases.

It is important that you read and really understand the small print of the terms and conditions.


Paying for one item over £100 with plastic offers the benefit of extra consumer protection, in addition to those legally required by section 75 of the Consumer Credit Act. For example if you do not receive the goods you ordered or the firm goes bust then in theory the credit card company will reimburse you.

Section 75 of the CCA makes the card company liable (along with the seller of goods or services) in case of breach of contract.

Debtwizard tips

During the interest-free or low-interest period, aim to reduce the balance as much as possible and don't use the card for new purchases. Alternatively, if you have the cash to clear the balance in full then why not put this into a high interest ISA until the deal ends? You could then make a profit. If you are unable to clear all the balance, consider taking out a loan at a far lower interest rate than the normal charge on the credit card and you could clear your debt more quickly.

Avoid multiple applications for credit as you will end up leaving 'credit footprints' on your credit file (they stay on your record for a year) which future lenders will see. This can make a lender wary as they may consider you to be desperate for money or think that fraudulent applications are being made. Either of these will have a detrimental affect on your credit rating.

If you want to protect your file be sure to make it clear to any lender you approach that you only want a quotation, and this will not leave a 'footprint' on your credit report.

Finally, make a note of when the introductory offer ends as missing this date could be costly!

More information of debt advice and our new 'Budget Planning Form' can be found at:

This article is intended to afford general guidelines on matters of interest. Accordingly, the information in this article is not intended to serve as legal advice. Therefore, no responsibility can be accepted by debtwizard.com, for any loss occasioned by a person acting or refraining from, acting on the basis of this article. Users are encouraged to consult with professional advisors for advice concerning specific matters before making any decision.

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