How to Save Money by Using a Money Transfer Credit cardPersonal_Finance / Credit Cards & Scoring Feb 09, 2016 - 02:06 PM GMT
The credit card market continues to thrive, which is great news for borrowers looking for low or interest-free deals on purchases and balance transfers. Credit cards designed for money transfers shouldn’t be overlooked either, as they can often be an innovative way of tackling expensive debts, such as bank overdrafts.
Research from Moneyfacts.co.uk reveals that borrowers could save over £70 a year in overdraft fees by using a money transfer card: a borrower needing £500 would pay only £8.45 with a card charging a one-off fee of 1.69% (the lowest currently available) compared to average charges of £82.56 a year (£6.88 per month) if £500 was borrowed using an authorised overdraft facility*. Borrowers would still save over £60 even if a money transfer card charged a higher fee of 4.00%.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“It’s clear that customers sitting in the red can save on high overdraft fees by making a cost-effective money transfer using one of the great deals on offer today. These cards are also useful for people who may already be in credit but who need extra cash for emergencies.
“The most important fact to remember about money transfer cards is that customers don’t get ‘free money’; there is always a handling fee to pay for making transfers and these vary considerably depending on the type of card and the interest-free term it carries. However, money transfer cards can be a great way to give borrowers a bit of breathing space, although they must strive to clear the balance before interest applies. A borrower being charged the average money transfer rate of 21.7% per annum would cost around £9 a month in interest on a £500 balance**.”
*Moneyfacts.co.uk’s average monthly authorised overdraft usage fee of £6.88 (on accounts without a monthly or annual account charge) would total £82.56 a year if borrowers used their overdraft for 12 consecutive months. The cost of making a one-off money transfer of £500 based on a handling fee of 1.69% would be £8.45. The cost of making a money transfer of £500 based on a handling fee of 4.00% would be £20.
**The interest cost of a £500 balance on a credit card charging 21.7% per annum is based on a minimum repayment of 1% plus monthly interest or £15, whichever is higher. It would cost around £9 a month, or £100 a year.
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