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0% deals

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Hi all,

Hope you can help me! I have 2 credit cards which each have about 10k on them and have an interest rate of 19% and 21%. Do you think its a good idea to apply for a few 0% deals and transfer them. The only worry I have with this is I don't applying for loads of things as it will effect my credit rating and also I am not sure about having debt on loads of different cards.... Please help!! :confused:

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  • NickX
    NickX Posts: 3,046 Forumite
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    Well I would go for the 0% option because you will save loads of money.

    One or two credit applications will not have too much adverse effect on your Credit Rating.

    Good Luck.
  • Typically consumers select a 0% balance transfer credit card as a means of lowering interest on their debt .There are many drawbacks and often the consumer actually builds more credit card debt by doing this. A balance transfer of 3% is always levied from these cards. For example a £5000 transfer means you will be charged £150. You don't have to pay the fee up front - it can be added to the balance. However, this only adds to your debt and gives another opportunity to accumulate more credit card debt.
    If you go over your credit limit, miss a payment, pay it late, send a bounced cheque or ask for a duplicate statement you could also be charged. Following an investigation by the Office of Fair Trading, these fees have effectively been capped at £12. When you have a premium credit card that offers enhanced rewards or credit limits you will be charged a additional fee of between £100 and £150 a year. Another important thing to look out for with these credit cards is an order of payments policy, known as a “negative payment hierarchy". Meaning when you use credit card for different purposes and unless you clear your balance in full, card providers will put your monthly payment towards repaying transferred balances before purchases and cash withdrawals. You accrue interest at the highest rate on these transactions. It’s structured so that you won't repay the more expensive borrowing until the cheaper debt has been paid off.
    [FONT=&quot]For example, Virgin's credit card offers 15-month interest-free period for balance transfers, but purchases is only interest-free for three months. Thereafter you will be charged the typical rate of 15.9%. Transfer your £5000 debt on the credit card and add 3% considering “negative payment hierarchy”. Your monthly repayments would go towards paying off the transferred balance first and once the three-month 0% offer on purchases runs out, that debt will attract interest at 15.9%. Let’s say you spend on the card as well, making purchases costing £1,000. The sum of the debt is now £6150-6300 at the interest rate of 15.9% or £72-85 monthly; in only four months. Any payments made do not apply to the initial £5000; as soon as that three-month 0% period expires you start accruing interest on the purchases unless you can pay off the whole balance.

    I hope that helps shed light on your issue:D
    [/FONT]
  • NickX
    NickX Posts: 3,046 Forumite
    Options
    Typically consumers select a 0% balance transfer credit card as a means of lowering interest on their debt .There are many drawbacks and often the consumer actually builds more credit card debt by doing this. A balance transfer of 3% is always levied from these cards. For example a £5000 transfer means you will be charged £150. You don't have to pay the fee up front - it can be added to the balance. However, this only adds to your debt and gives another opportunity to accumulate more credit card debt.
    If you go over your credit limit, miss a payment, pay it late, send a bounced cheque or ask for a duplicate statement you could also be charged. Following an investigation by the Office of Fair Trading, these fees have effectively been capped at £12. When you have a premium credit card that offers enhanced rewards or credit limits you will be charged a additional fee of between £100 and £150 a year. Another important thing to look out for with these credit cards is an order of payments policy, known as a “negative payment hierarchy". Meaning when you use credit card for different purposes and unless you clear your balance in full, card providers will put your monthly payment towards repaying transferred balances before purchases and cash withdrawals. You accrue interest at the highest rate on these transactions. It’s structured so that you won't repay the more expensive borrowing until the cheaper debt has been paid off.
    [FONT=&quot]For example, Virgin's credit card offers 15-month interest-free period for balance transfers, but purchases is only interest-free for three months. Thereafter you will be charged the typical rate of 15.9%. Transfer your £5000 debt on the credit card and add 3% considering “negative payment hierarchy”. Your monthly repayments would go towards paying off the transferred balance first and once the three-month 0% offer on purchases runs out, that debt will attract interest at 15.9%. Let’s say you spend on the card as well, making purchases costing £1,000. The sum of the debt is now £6150-6300 at the interest rate of 15.9% or £72-85 monthly; in only four months. Any payments made do not apply to the initial £5000; as soon as that three-month 0% period expires you start accruing interest on the purchases unless you can pay off the whole balance.[/FONT]

    Right you have just repeated here an article from the press that has been published on the site several times.

    Whilst all the points made are valid and there are pitfalls around using Credit Cards, if you know what you are doing then you can definitely save money with Credit Cards. I have been doing so for over 10 years now.

    All the information required to play the Card Providers at their own game is contained within this site, so I say do your own research and ensure that you understand the Terms and Conditions, and use Credit Cards to your benefit, not the Card Providers.

    That article is overly negative in my opinion and once you are aware of the pitfalls they are easy to avoid.

    I understand that not everyone will want to do this, so each to their own.
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