The Cost of Credit……Cards
With the cost of living rising, many dentists are turning to credit cards to fund their lifestyles. So if you are not one of the lucky ones who clear their balance each month then you may well be familiar with the credit card balance transfer rates on offer.
When looking at credit commitments your first port of call should be to try renegotiating with your existing credit card providers as this may well be the cheapest option. If they have attractive rates for new customers call them and ask to be switch to that rate – for the cost of the phone call you may be able to knock 9% per annum off your interest rate – on a balance of £5,000.00 this would be £450.00!.
However if the above option doesn't work the following may help you decided on what to do next...
After completing research this afternoon, I found 102 '0% balance transfer offers' so how do you work out which deal is going the best for you?
Firstly how long is the 0% rate for? Some cards give you an end date, whilst others a monthly term, as of today longest period on offer is 15 months.
Secondly is there a fee and if so how much? Of the 102 deals in front of me only 3 don't have fees and they also carry the shortest 0% period. Perfect for those who know they will have cleared the balance in say 6 months. The remaining 99 deals carry fees of between 2-3% of the balance you are looking to transfer and the longer the 0%, the higher the fee.
If you believe you will be able to clear the balance by the end of the interest free period then these deals are perfect, however if this is not the case then there is an alternative.
Certain credit cards offer balance transfer rates for the life of the balance, and of the 12 deals of this type on offer the rates vary from 4.9% to 12.9%. These rates are more comparable to those of personal loans and offer greater flexibility than most loans as they can be repaid without penalty, at any time. Some of the transfer rates do carry fees however they may work out more competitive in the long run if you feel that it may take several years to clear the debt.
There are also 67 cards available offering 0% on purchases for the first few months, and again these are perfect if you know you will able to clear the balance during that time. If you are opting for this type of deal, make sure you check what the rate will revert to at the end of the interest free period as this is likely to be quite high.
The key to this is to know what rate you are paying and when that rate will end, if you are switching from interest free deal every 9 months, you may find that due to the fees involved when transferring, you are better off taking a card with a lower rate for the life of the balance. However the most important point is that whatever the rate, try and maintain at least the minimum payment each month and if you are struggling with payments, always speak to the card provider, as they may be able to help!
*Research completed 25 July 2008