It’s the beginning of the year, and the majority of people are trying to recover from overspending during the Christmas period. One of the most common methods for consumers to stabilise their finances is through balance transfers.
According to the Co-operative Bank, 20% of people who have taken out a 0% balance transfer credit card over the last five years have managed to violate the terms and conditions which has barred them from the original promotional offer. This has resulted in them having to pay higher rates of interest and collectively it is costing borrowers £948m a year.
Balance transfer credit cards do state this information in their terms and conditions. One late payment can lead to the standard APR being enforced which can be as high as 18-20%.
These mistakes are common, 37% of credit card holders have become victim to such charges. Typically those who lose their promotional offers do so during the first five months of receiving their credit card.
A further 30% of card holders are unaware that it is possible to lose their promotional offer if they made a late payment or if they exceeded their credit limit. This is a strong indication that customers are not reading their terms and conditions.
Some credit card holders caught up in the 0% balance transfer commotion end up unable to pay the high interest rates and so take out loans, dip into savings, or increase their overdraft to make payments.
Balance transfers are an effective debt management strategy; however, if customers are unfamiliar with the terms and conditions of the card they risk ending up in more debt.
It is imperative that you read the small print so that you are not caught off guard and hit with an unexpected bill at the end of the month.
Photo credit: Hakan Dahlstrom