Published on September 1st, 2011 | by Tom Wake0
This credit card tip could save you thousands of pounds in just a few minutes
This is a tip that’s personally saved me thousands of pounds in interest payments for really just a few minutes work.
Let me start with an example…
You have a credit card holding £5,000 of debt on it and your annual rate of interest is 16.9%. At that rate you pay a whopping £845 a year (if you didn’t pay off any of your balance). That’s money down the pipe and of course the longer it goes on the more your debt increases and the worse it gets.
But there is a clever trick you can use to instantly lower your interest you pay… if you’re happy to play the credit card companies at their own game.
Enter the world of balance transfer busting!
You can beats off the lion’s share of the interest by playing credit card deals off against each other. You simply go online and choose the best, longest term 0% APR deal you can find and transfer all your old debt onto this new card.
Once you’ve done this it’s best to rip up your old card, cancel it, and put the entire debt onto the new one. So now you’ve effectively passed on your old debt to a new credit card at 0% interest and you won’t pay interest for another year and a half (or however long the deal is for – some of the better ones are currently offering 18 months).
Just before that 18 months is up you do exactly the same thing again, choosing a different card company. If you do this you effectively avoid ever having to pay anything like the full APR.
There are tons of card companies offering these deals which is why it works so brilliantly.
But… and there is a but… credit card companies do charge a ‘balance transfer fee’. Now this isn’t a total party pooper. The fee is typically 3%.
That’s a lot of money… but 3% instead of 16%, or worse, is a hefty saving especially if you get a 18 month+ deal.
Thanks go to my old flatmate, the eternally impoverished Mike, for this debt side stepping tip.
Obviously I wouldn’t recommend doing this unless you already have debt. I’m wholly against anyone getting into the red if it can be at all avoided.
However, if you’ve already got a credit card(s) which you’re paying high interest on there’s no sense in suffering more than you have to. Carefully managed this trick could get you out of a spot of bother.