Recent research suggests that over 60 percent of individuals who obtained one of the 0 balance transfer credit cards out there to help with their credit card debt ended up spending on it and running up large interest bills. Many of these people have admitted to spending on the cards they obtained to take advantage of the 0% on the transfer and on doing so end up paying interest at a much higher rate. Also up to a third of these people who used the card to buy additional things said they had no intention of doing so when they applied to get it.
The problem is that spending money 0 balance transfer credit cards could cost much more than they realize in interest because in most cases repayments are used to clear the cheapest debt first. Simply put, all of the customer repayments made will be chipping away at the transferred balance at 0% interest whilst the high interest debt from the additional spending will be sitting behind it accruing interest.
It can be very tempting to borrow more than you need or spend on the card when things are tight and it is a struggle for many people to change their spending habits. If it is handled properly moving credit card debt on to these 0 balance transfer credit cards can be a very wise move and a very useful tool.However the problems arise when (as most people do) people struggle to make changes in their spending habits. It is very important that you manage your money properly when you have a 0% rate. The temptation can be to use your older card or much worse start making purchases with the new one and leave you spiralling in debt.
From the start of next year customers in the UK will be able to make payments onto the card and these will have to be used by the credit card companies to service the most expensive debts first, until then however BEWARE most of these companies are still profiting from paying off the low rate debt first.
Lots of people are continuing to make this mistake of spending on a credit card that should only be used for a balance transfer despite the huge publicity surrounding the issue. There are also many cards that offer 0% on balance transfer AND purchases but this only complicates matters more as the term for the purchases on the majority of the cards is really much, much shorter. When this term ends the high interest debt is subsequently blocked in until the 0% transfer balance has gone pushing the debt up even further. A good way to prevent yourself falling into this trap would be to get two credit cards, one for purchases and the other just for the transfer balance. In the current financial climate credit is obviously much harder to obtain so this may not be feasible. Just try to stay disciplined and to keep within your limits and you can benefit from 0 balance transfer credit cards.
