MARTIN Lewis has issued an urgent warning to anyone using a credit card this Christmas, and the rules they must follow.
Picking the wrong card, paying too much interest and not clearing your balance in full each month can hurt your finances – not to mention your credit score.
And Martin Lewis is warning shoppers to sort out any credit card debt they may have now, instead of waiting until after Christmas.
Writing in the latest MoneySavingExpert (MSE) newsletter, he urged Brits to look at moving their debt to a 0% balance transfer card.
If you have credit or store card debts debts that are gaining interest you can move the money you owe onto the card.
That means you can focus on repaying the debt, rather than the amount added in interest, and it can help you get back in the black faster.
MoneySavingExpert has a comparison tool to help you decide which balance transfer card will work for you.
It’s worth noting that only people with the best credit ratings will be accepted for the top deals though.
Even if you do get accepted, you may also be offered a smaller 0% period and be charged a bigger transfer fee.
You should never miss the minimum monthly repayment or you might lose the 0% interest-free period, meaning it will cost you more.
The consumer experts shared four “balance transfer golden rules” you should follow if you’re thinking about getting a new card.
Pay your balance in full
The best strategy is to set up a direct debit from your bank account which clears the full balance of your credit card every month.
This way you won’t lose the 0% deal.
If you can’t afford to clear your balance, then try to pay off as much as you can without impacting the rest of your finances.
If you only make the minimum repayment each month, it could take years to clear the balance and you’ll pay hundreds – or even thousands – in interest.
A repayment calculator can help you work out how much you’ll pay in interest and how quickly you can clear your balance.
Clear the card
The interest-free period on a balance transfer card won’t last forever.
It is important to be prepared for when it ends as your card will then move onto a higher APR more in line with standard credit cards.
This is where banks make their money, as they rely on borrowers falling onto the high rates of interest at the end of deal period.
Make sure you can clear as much of the debt as possible within the interest-free period, otherwise interest will be added to your repayments once the deal term ends.
At this point it may be worth doing another balance transfer if you still have debts left.
Don’t withdraw cash
You shouldn’t spend or withdraw the cash as you’ll be charged and it could affect your credit rating.
Check your card
Consumers usually have to transfer their debts within the first three months of opening the card to get the interest-free deal – so make sure you check the terms and conditions.
You also can’t usually transfer debts between cards belonging to the same banking group.
How do credit card balance transfers work?
A balance transfer card can temporarily reduce the interest payments you make on your credit card debt.
For example, if you had credit card debt of £4,000 and were struggling to keep up with the repayments, you could clear it with a balance transfer card.
Your balance is cleared and the credit card paid off, which should give you some peace of mind.
That’s not the end of the debt though, it has just reduced the interest payments.
The money is then moved onto a new card that instead lets you focus on repayments for an interest-free period.
This should help you clear the balance faster.
You still need to repay at least the minimum amount each month. However its best to try and clear the outstanding balance before the 0% period ends to avoid paying interest.
There may also be a fee for the transfer.
How to do a credit card balance transfer
You can search for the best balance transfer credit cards on comparison websites or directly with providers online.
There are a few factors to consider when choosing a balance transfer credit card.
The main one is the interest-free period.
This tells you how many months you can repay the debt for without any interest being charged.
There may also be a balance transfer fee and a maximum number of days to actually move your money before the introductory offer expires.
Check your existing cards first to work out how much you owe, as there may be a maximum amount that some balance transfer credit cards will let you move.
In most cases, providers won’t confirm the balance transfer limit until they have processed your application.
However, a small number of providers have started offering guaranteed balance transfer limits as part of the eligibility check.
You can usually apply for a balance transfer credit card online or on the phone, and banks may be able to help in-branch.
To make an application, you will need to provide your name, address and an email as well as details of your income so a provider can assess your eligibility.
You will also need to provide details of how much money you want to transfer to the new card, but you can often do this after you have been accepted.
If your application is approved, you will need to transfer the balances within a set period, usually around 60 or 90 days.
Your old balance will then be cleared and you can start making interest-free repayments on your new card.
Meanwhile, Martin Lewis has warned households earning less than £40k to do urgent check.
And he reveals how thousands could turn £800 into £5,000.