Are you Paying Interest on your 0 balance transfer credit cards?

Using one of the 0 balance transfer credit cards to obtain a lower rate with an existing credit card debt has caused over 2 thirds of people who got them, to run up high interest charges due to them spending on the card according to recent surveys. Many of these people have admitted to spending on the cards they obtained to take advantage of the 0% on the transfer and on doing so end up paying interest at a much higher rate. What is even more alarming is that when asked a third of these people never intended to buy anything with the card in the first place they just got it to transfer the balnce of a previous card.

The cheapest debt on the vast majority of 0 balance transfer credit cards is front loaded and this often confuses the customer causing them to run up higher interest charges without fully realising. Simply put, all of the customer repayments made will be chipping away at the transferred balance at 0% interest whilst the high interest additional spending will be sitting behind it accruing interest. Trying to change ones spending habits for the most part is a difficult thing to do, sometimes when personal finances are tight, over-borrowing can be a hard temptation to resist.

Moving ones credit card to one of the 0 balance transfer credit cards on offer to take advantage of the low rate is a good move providing it is done correctly and is used as a tool to tackle the debt. However the problems arise when (as most people do) people struggle to make changes in their spending habits. It is very important that you manage your money properly when you have a 0% rate. The temptation can be to use your older card or much worse start making purchases with the new one and leave you spiralling in debt.

The good news is for UK customers that from the start of 2011 these credit card firms will be forced to take down the highest interest debt before the cheaper debt when they receive customer payments, until then though many of them continue to make profits from front loading the cheapest debt. Lots of people are continuing to make this mistake of spending on a credit card that should only be used for a balance transfer despite the huge publicity surrounding the issue. There are also many cards that offer 0% on balance transfer AND purchases but this only complicates matters more as the term for the purchases on the majority of the cards is really much, much shorter. When this term ends the high interest debt is subsequently blocked in until the 0% transfer balance has gone pushing the debt up even further. A good way to prevent yourself falling into this trap would be to get two credit cards, one for purchases and the other just for the transfer balance. However, this may not be possible due to the more recent events in the financial markert. Being disciplined and controlled when spending and borrowing and just simply using your head with 0 balance transfer credit cards will keep you from their downside and thus, they can be a useful tool in the management of your debt.