Balance Transfer Disasters by:Peter Kenny
There has been a rapid growth in the availability of zero per cent rates in the credit card industry
. These have been caused by the combination of very low national interest rates, and the injection of fierce competition from American lenders such as Capital One. The UK credit card industry is now recognised as one of the most sophisticated and competitive credit card markets in the world.One of the most popular innovations in the past number of years has been the introduction of the zero per cent balance transfer. This has revolutionised the finances for many indebted customers. How it works is if you have very high interest charges on one of you're out standing credit card balances, then you can transfer it to a new credit card. In exchange for getting your business in this way, the new credit card provider will give you a zero per cent interest rate on the sum transferred for a period of usually, six to nine months.
While taking advantage of these zero per cent offers is highly advisable, as it can save you literally hundreds on interest charges, there are still precautions that you should take if you wish to avoid some costly mistakes. The first thing to realise is that there are different types of zero percent. What you will most likely come into contact with is zero per cent on balance transfers or zero per cent on purchases. You must not confuse the two.
If you have zero per cent on balance transfers then that will not mean you have zero per cent on purchases, so any purchases you make during your zero per cent period will not be at zero per cent but at your standard rate. This can be very important if we look at the situation using an example.
Supposing you have five thousand pounds on a credit card a 15%. If you transfer this to a card that gives you 0% on balance transfers for nine months you will save hundreds on interest. However, supposing the new card has a standard rate of 15% also. Now, if you have your five thousand on it safely at 0%, but suppose you make one hundred pounds worth of purchases. And then you pay back one hundred pounds; the one hundred you pay back will be applied to the first one hundred of the five thousand-balance transfers. This will leave you with 4,900 left at zero per cent on the balance transfer, and 100 as a purchase that attracts the standard 15%.
In this way you can quickly see how a zero per cent balance transfer can become a 15% purchases balance.
About the author
Peter Kenny is a writer for creditcards-gb. For additional articles and an extensive resource for everything about credit cards, please visit us at http://www.creditcards-gb.co.uk and http://www.creditcards2go4.com. Choosing a Business Location by:Emma Mitchell A Closer Look at Pay Day Loans vs. Bank Overdraft Fees by:Alan Luong Your 30 Minute Home Business Plan by:Liz Folger Why Should You Have A Home Business? by:Roxanne Greenidge Purchasing a Home with Bad Credit by:Jennifer Hershey Finding The Right Payday Loan by:Alan Luong Send a Media Release to Stand Out and Shine by:Sue Currie Let Accounting New York Bother For Your Accounting Hassles by:Peter Terry What You Don't Know About Property Tax Could Be Costing You Thousands of Dollars Each Year! by:Rosemarie Mandel Property Abroad. Tips For Buying In 2006? by:Robert Horwood Cash Loans UK for Immediate Needs by:Antonio Vargas Credit Repair - Take Action Now by:Randy Rowles Does Blogging Get You More Sales? by:Jim Symcox - Marketing Magician