Much has been said about the recent UK recession, with businesses tumbling and individuals feeling the pinch of more stringent spending budgets.
Like many other industries, the recession has had a dramatic effect on the credit card industry, which has racked up billions in losses amid a sharp increase in the number of people who can’t pay their bills because of a job loss or other financial hardship. That, in turn, has had a ripple effect even on some credit card customers who have always paid their bills on time.
In order to adapt to the drastically changed economy some credit card issuers have raised interest rates substantially, causing in some cases to double or even triple the total minimum monthly payments. Reports of people receiving letters from their credit card lenders about an increase in interest rates have been well documented in the recent months.
As many customers started to re-examine their day-to-day finances, with debt consolidation being one of the options, switching current balances to other issuers offering 0% balance transfer cards seemed like a most sensible solution. However, due to recently introduced new government legislation aiming at protecting the credit card holders, the outcome may actually cause balance transfer credit cards to lose their appeal.
The reasoning is the following: while companies will have to adhere to the new rules protecting the customer they will also look for ways to recoup lost income. For instance, some companies have already cut the length of their balance transfer offer from 16 months to 14 months or shorter, with many others to possibly follow. The future increase in fees and interests also seem inevitable.
Customers should shop around for the best available deal and check if benefits gained from a lower interest far outweigh initial set up costs. Things to look out for are: transfer fee (usually around 3% of the balance being transferred), a typical 16.9% APR for ongoing purchases and even more on cash advances.
Are there any other downsides to balance transfer credit cards? Although it’s highly advisable to consider some other alternatives like debt consolidation or personal loan, credit cards balance transfer still remains the best option to curb your debt. It’s not ideal but very often can do the trick. The only thing to remember is that 0% rate lasts for a limited period of time and the balances should be paid off quickly.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Adam Singleton writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.