Five reasons a balance transfer card isn't good for you

The top credit cards aren't always appropriate.

The credit cards that you see advertised the most are 0% balance-transfer cards. These cards offer an introductory deal where you won't have to pay any interest on your debt for a period between six and 22 months. You'll also normally have to pay a fee of around 3% although some cards charge lower fees.

This all sounds great if you're currently paying 8% APR to 20% APR on your existing debts, which isn't cheap – especially at 20%! 

However, that doesn't mean you should rush to get such a card, as it might not be the bargain you wanted, or it may not be best for you for another reason. Here are five arguments against taking out a balance transfer credit card: 

1. There could be a better card deal for you

Balance-transfer cards are for moving debts from another card or loan to reduce the interest you pay. A few cards also let you transfer your overdraft debt. (As far as I'm aware, currently just MBNA cards allow this, including those from Virgin Money. The fee is 4% for overdraft transfers.) 

Hence, unless you're transferring a debt, you should consider a 0% on new purchases cards instead. Or, if you're able to resist the temptation of getting into debt, cashback cards are your best option as they give money back on your everyday purchases. However, it's then essential that you pay off your card in full every month. Otherwise you'll be hit by high interest charges.

2. Some debts aren't worth swapping

A balance-transfer fee is normally worth paying if you're going to take more than three to five months to repay your debt. If you're going to pay it off quickly though, it'll probably save you very little to switch to a 0% card. It might even cost you more in fees if your existing debt is charged at about 20% APR or less. 

This is because transfer fees are paid on the whole balance up front, whereas interest payments are spread over the year. As your debt gets smaller you'll be paying less in interest because the outstanding debt is smaller.

3. Watch your record

If you're going to take half a year or longer to pay off your debts, a balance-transfer card will probably save you money, and possibly a lot of money. However, card companies want your debt because they know many people don't pay off the whole balance before the interest-free deal expires, and then they don't bother switching cards again. This means you'll be shunted onto shockingly high interest rates. 

You have to understand your character before switching. If you know that you'll probably still have large debts outstanding when the 0% deal expires, and you know that you just won't be organised or energetic enough to switch again for years, or that you'll merely make the minimum repayments on the card, then another credit card might not be the best choice for you. It'll likely cost you more in the long run in fees and interest, and dragging out a debt leaves you vulnerable to financial shocks when life throws one of its many, inevitable emergencies at you. Kicking the can down the road isn't a long-term solution.

You should consider a personal loan instead, which will ensure you pay off the debt in regular instalments, and at a much lower interest rate. 

4. If your debt is growing

Here's a fantastic sign that a balance-transfer card isn't the solution to all of your problems: your debts have been growing for several years.

If you've failed to control your debts for years, despite intending to, opening up another form of debt (and maybe consolidating yet again) will probably just encourage you to swell your debt problem further. The new card might temporarily save you interest, but where you will make real savings is by changing your money habits. 

Some people look back and say their debts were worth it, even if they accept that having had debts means they're poorer in the long run. (Poorer for the rest of your life, in fact. Read How to spend less and have more.) Many others say they wish they hadn't racked up those debts; that they probably could have enjoyed themselves and experienced the world without it. But I'm yet to meet anyone who didn't rack up debts in their youth who says they wish they had. 

Not building up debts is the safest way to have no regrets. 

5. Your record is bad enough already

If you have already missed several payments in the past three years, overstretched yourself, or had other financial difficulties, you probably won't be accepted for a top card deal. Applying again might simply make your record that much worse. Prospective lenders are put off if have made too many applications for credit in the past six months. 

If at first you don't succeed, don't try again.

Instead, make a big effort to repair your credit rating and reduce your debts as the cost of borrowing from here on is likely to be extremely high. It also makes sense to contact one of the free debt advice organisations who can give you invaluable help. Take a look at National Debtline (my top choice), Citizens' Advice and the Consumer Credit Counselling Service. There are also some good debt discussion boards on other sites as well as lovemoney.com's Q&A tool.

More: Compare credit cards through lovemoney.com | The interest you pay in “interest-free” credit cards | Avoid this expensive mortgage trap