0% credit card balance transfer, whats the catch?

newmug

Hi folks. I find it hard to believe that you can start an account with a new credit card company, give them your debt, and pay them zero interest for 6 months. Whats in it for them? Whats the catch?

Greyian

If you've got debt to transfer, they likely expect you to run up debt again on the new card, which you will be paying interest on after 6 months (as well as the fact that many people won't pay off their transferred debt either, as they won't be bothered when it's at 0%).

newmug

Greyian wrote: »

If you've got debt to transfer, they likely expect you to run up debt again on the new card, which you will be paying interest on after 6 months (as well as the fact that many people won't pay off their transferred debt either, as they won't be bothered when it's at 0%).

That's a big gamble though isn't it? I mean, if somebody ran into difficulties such that they need to do financial gymnastics to save a few hundred quid per year, surely they're at risk of not paying back anything? Or of just pulling the same stunt and moving to yet another CC company after 6 months?

stevedublin

is there credit cards companies still doing this?
I thought this practice died with Celtic tiger.

newmug

stevedublin wrote: »

is there credit cards companies still doing this?
I thought this practice died with Celtic tiger.

I think there is, maybe I'm wrong:


http://www.bonkers.ie/compare-credit-cards/your-results/

pawrick

I set up a new account with ptsb in December and they asked me in the branch if I would be interested in transferring over any credit card balance that i might have with my other bank for 0% interest, so it was definitely still available last month. I don't know the specifics of the offer as I wasn't interested but 0% was mentioned.

Nervous Wreck

From an older thread:

Nervous Wreck wrote: »

The way it works is you don't pay interest on the amount of the balance transfer for the agreed time, no matter what. However, and it's a big however, you do pay interest on any further transactions you make. This is important to be clear on because payments that you make to your Credit Card are applied against the oldest transaction first and, in this case, the oldest transaction will be the 2k that you transfer from your existing card. So, until you clear the amount of the balance transfer, you will continue to accrue interest on all subsequent transactions.

For example:

Balance transfer = €2000
Subsequent transactions = €100

You don't pay interest on the €2000 but you do pay interest on the €100 and will continue to do so until you have paid €2100 off your card.

newmug

Is there anything stopping you from just switching to someone else, with another 0% for 6 months offer, at the end of your first 6 months?

Nervous Wreck

Technically, no. But the new company will likely ask for 6 months statements as part of your application and will spot fairly sharply what you're doing so they may not accept the application.

km79

newmug wrote: »

Is there anything stopping you from just switching to someone else, with another 0% for 6 months offer, at the end of your first 6 months?

I've done it almost once a year for last few years. no problems

BazzaDP

newmug wrote: »

Is there anything stopping you from just switching to someone else, with another 0% for 6 months offer, at the end of your first 6 months?

People's lack of discipline and also the risk you don't get a credit card with same interest free offer.

You can save money on this, but one failed payment (because you were on holiday, or forgot, or your employee was late paying you) and you're usually well out of pocket. This is what the CC companies are depending on and why they have these offers.

Wouldn't recommend trying to continually balance a large amount like this long term. Treat it as a very short term solution if you already have a large balance, pay it off during the interest free period, and never rack up credit card debt again. Other than these offers its a very expensive way of borrowing money.

Padraig Mor

Don't forget that you still need to make the minimum payment to the card every month - normally 2.5 to 5% of the outstanding balance.