The credit card has become a ubiquitous feature of modern life, and even in straightened economic times, credit card companies continue to vie for your business with introductory deals offering low interest rates for a fixed period of time.  Of course, the industry is no longer a specialist concern, and the term credit card companies is just as applicable to high street banks like Santander as it is to those firms that pioneered these products.  Here we will take the Santander credit card as a representative example of the kind of deals currently on offer, and then look at how these deals can be used to make credit card companies work for you.

At the time of writing, the Santander Credit Card offers 0% interest on balance transfers for the first 17 months, with a 3% fee charged for arranging the transfer.  This feature can therefore provide a decent period of time during which debt accrued on other credit cards can be paid off, without your funds being drained by interest payments.  Indeed, the worst way that you can use any credit card is to continue making minimum monthly payments on a card charging full interest.  This tactic only extends the life and therefore the size of the debt, thanks to the continual addition of interest to the balance owed.

The regulations regarding minimum payments changed from April 2011, requiring the minimum monthly payment to include at least 1% of the actual balance owed, rather than just a tiny fraction of this sum plus interest payments, as was formerly common practice.  Regardless, it can still take years to clear the debt at the minimum repayment rate, and years of repayment can result in the debt costing thousands of pounds.

Using balance transfer deals is thus the primary way that you can make credit card companies work for you, but there are a few things that you need to look out for.  Perhaps most importantly, you should avoid making purchases with a card that you are using for its interest free balance transfer facility.  Keep it simple, and only have the balance that you have transferred and wish to clear on the card, splitting this up into equal monthly segments that you will pay off before full interest rates kick in.

The strategy outlined above will avoid the need to pay interest on purchases.  While the Santander Card offers interest free purchases for the first three months – and the new regulations introduced in 2011 mean that your repayments have to be directed towards the most expensive debt on the card first – the most valuable feature of the card for those carrying accumulated credit card debts is the interest free balance transfer.   Basically, the future is unclear, and while there are a range of interest free balance transfer deals currently on the market there is no guarantee that such offers will be available in just a couple of years time.  Your top priority should remain clearing your debt during the time that you are guaranteed not to have to pay interest on the balance.  For more information on credit cards and balance transfers, try looking at:

Image: David Castillo Dominici /


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