For smaller debts of a few thousand pounds or less, you can save a fair amount in interest payments by shifting the debt to a credit card which offers a balance transfer offer.

First introduced to the UK by Egg back in 2000, an introductory 0% deal lets you load up your credit card with debts from other places (overdrafts, other cards etc) and avoid paying any interest on the balance while the offer lasts.

Most offers used to be for 6 months, meaning no interest would be charged on transferred balances for the first 6 months after opening your card account, but with competition longer and longer introductory periods are available - up to a full year in some cases.

The aforementioned Egg card also now has a recurring offer, with new balance transfer ‘windows’ every year which you can take advantage of.

If you have a decent credit rating, it’s possible to keep applying for a new, different, card every time you get towards the end of your 0% period, and do another balance transfer. So long as you are scrupulous about not using these cards for purchases, and you always transfer the full balance to a new card before the introductory period is over, this can be carried on almost indefinitely, and is a good way of avoiding interest on your debt while (ideally) paying it off as quickly as possible.

Fees…

Recently however, this technique has become a little less attractive following the introduction of balance transfer fees, where your card issuer will charge a small percentage of any transfer. The amount charged is usally around 2%, and normally capped at a maximum of £50, so you’ll have to work out if you’ll save enough in interest charges to make the balance transfer still worthwhile.

Low rates ‘for life’

Another kind of offer which has become increasingly popular is the ‘low rate for life’ option. Rather than charging 0% for a limited period, these cards will charge a smaller interest rate indefinitely, until you’ve cleared the balance. As the interest rate will almost certainly be lower than the one you’re paying now, it makes sense to use one of these cards if you can, especially if you plan on paying off a little of the balance every month.

Once again though, avoid spending anything on these cards until you’ve cleared your balance, or you’ll effectively be chipping away at the low interest rate as more and more of your balance gets charged at the higher purchase rate.

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