Zero interest cards and balance transfers

 

Card providers often provide the option of a balance transfer from another card to theirs which is interest free, sometimes for a fixed period, sometimes not. These are not handled by B:DF as by the time you have researched the way in which your particular card is handled by your provider, you will know all B:DF could tell you anyway. To illustrate, here are two scenarios ...

A completely interest free card or balance transfer


These don’t need any management at all, if you could move all your balances onto one card with no interest, you could repay all your card debt by just repaying the capital, the best possible outcome. If you have a card like this, you don’t need to manage it with B:DF, it may be worth seeing if you can transfer other debts to it. Then pay the minimum until you have cleared all your other cards, then pay it off. If it is only interest free for a fixed period, enter it into B:DF at the end of that period as with any other card.


A interest charging card with an offer of an interest free advance or transfer


At first this may seem, as above, an undiluted ‘good thing’. There are some things to get clear in your own mind before you decide. If you have an existing balance on the card, and then take up the offer of an interest free advance or balance transfer, card providers tend to use all your repayments to pay down the interest free debt until it is paid off. The same applies if you have an interest free card on which you spend further money without the offer of it being interest free. What happens, in effect, is that any interest bearing balance is put to one side, accruing interest at the provider’s usual rate, compounded monthly, whilst any payment you make is being deducted from your interest free advance. For example, if you have a card on which the balance is 1,000 at 15% and usually pay 50 per month on, and you then take up a 500 interest free advance or balance transfer, your next ten payments are taken up with clearing the 500 interest free balance. Meanwhile, your balance of 1,000 has been accruing interest at the normal 15% rate rising to 1,132.27. So you might think that your interest free 500 has just cost you 132.27 over ten months, and I would agree. Comparing the details of your provider’s terms and conditions with your other debts and options will help you decide whether to take up such offers. Once they become straight repayments, enter them into B:DF as normal and get them paid off.