Don't Panic - 0% Credit Card Deals Are Not Going Away
April 2005
The Personal Finance press has been reporting all this week that the 0% introductory offers on Credit Cards are soon to disappear. This in our view is unlikely for three reasons
- The death of 0% has been reported many times over the last few years and yet they are still available
- As long as one credit card company continues to offer the facility others will be forced to do likewise, and
- Don't put it past the sneaky credit card firms to be actually making money from these deals
In fact the cynic in us believes that the whole story of last week was nothing but a plant by the credit card companies to generate massive free publicity. And if so they certainly pulled off a massive coup.
It's All About Past Data
The Credit Card companies have access to very valuable data. For example, they know that a certain percentage of people who take out the 0% cards are organised enough to pay on time and keep transferring debt from one card to the next. These people are obviously costing the card companies money.
But more importantly how many people take these deals out and are caught out by late payment charges and forgetting to transfer the debt when the present )% deal expires? We'd suggest many more than are originally thought. Also by gaining new clients you can sell new products to them and that can be worth a lot of money.
Watch The Small Print
The card companies are also catching many 0%ers out with certain small print tricks. For example, you transfer £2,000 from Barclaycard to a 0% card. This rate is fixed for 9 months. However you also pay for a plane ticket on the card costing £350. The following month when you get the bill you pay off the minimum of the £2,000 debt AND the full £350 for the plane ticket. But this is not how most cards work.
You will in fact not be able to pay off the £350 until ALL the balance transfer amount has been settled! Therefore the £350 will be attracting interest of normally 14.9%+ for many months.
So use this rule: If you ever transfer a debit to a 0% card NEVER spend on that card until you've cleared the original debt.
Summary
Don't worry about 0% deals disappearing and continue to take advantage of this excellent personal finance trick.
Credit Cards That Offer Free Balance Transfers
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