Counting the cost of Christmas
Indigestion. After Christmas, our credit cards can become a little bloated. Just like Santa’s little helpers, card companies come to the rescue with offers to cut the cost of our indulgence with balance transfer and preferential interest rate deals. You’ve probably received a stack of stuff through the post. How do you make sure you don’t end up with a turkey?
0% interest? Sounds great. But how long for? Such deals are typically for eight or nine months and now usually charge a fee. Originally capped at £30 or £50, a few still are but they’re now commonly 2% of the whole balance.We’ve even seen a whopping 3% without an upper limit.
No interest? 0% for eight months plus a 3% fee equates to about 4.5% pa. Not bad except that at the end of the introductory rate period the account would move to the standard interest of, say, 16%.
Get a balance. “Lifetime of balance” deals charge a low rate; say 4 to 5% until the balance is discharged. However, card operators apply payments to the lowest interest rate part of your balance. If you have a few hundred pounds on your account make sure it’s paid off before transferring a balance. If you open a new card for the promotional offer, never make another charge to that account until the transfer is paid off.
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