Use This Credit Card To Beat The Crunch

Are you paying too much interest on your debts? This credit card could help you through the hard times ahead.

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Much has been made of 0% credit cards in recent months. And rightly so - you could slash the interest you pay by choosing a 0% on balance transfers card and shifting your most expensive debt onto it.

The problem is that these deals don't last forever. In fact, they very rarely last longer than 15 months.

And this means that - to avoid paying interest - you have to be able to clear the balance within this time or switch to another 0% deal when the first one ends.

You may not want the hassle, or the transfer fees, that this involves. And as the credit crunch bites deeper, more credit card applications are being rejected - so you might not even be able to get another 0% deal when your current one ends. Eeek!

If you get stuck on your original card, you could end up paying interest of 16%, or even more. Yuck.

A lifetime alternative

But it's not all doom and gloom. If you're not in the position to pay your balance off quickly, a lifetime balance transfer card might be the way forward.

With one of these, you pay a really low, fixed rate of interest on the transferred balance until it's completely cleared - however long that takes.

This means you can take out the card now, transfer more expensive credit card debt onto it, then sit tight and face the credit crunch knowing you won't have to find another card next year.

I still have some credit card debt from my less Foolish days. If I haven't managed to clear my balance when my current 0% deal comes to an end, I'll definitely be trying to get a lifetime balance transfer card myself.

What's out there?

There aren't many around, but here are the best ones I've found:

When you're choosing which card is best for you, there are a few things you need to think about.

Will you be making purchases?

It's generally a bad idea to make new purchases on these cards, even if a 0% new purchases period is offered.

This is because of negative payment hierarchy. Simply put, your most expensive debt will be paid off last - and not until you've cleared your (lower interest) balance.

Although the Citi credit card mentioned gives a really good interest rate (4.9%) on balance transfers, I think offering the prospect of iTunes reward points on all your new purchases is a sneaky move.

It encourages you to run up a bill that you'll be charged a high rate of interest on - and there's no 0% introductory period.

So if you do need to spend more on a credit card, it's a good idea to find one specifically designed for new purchases (perhaps one that offers cashback or rewards), and then make sure you pay it off every month!

Is there a fee?

When choosing your lifetime balance transfer card, you also need to work out whether you'll be better off with a slightly higher rate of interest, or paying a one-off balance transfer fee.

For example, the Barclaycard mentioned charges no transfer fee at all - but its balance transfer interest rate is 6.5%.

The Citi card has a 3% fee - but a balance transfer interest rate of just 4.9%.

As a rough guide - if you intend to pay off the balance within a year, I think the Barclaycard is the better option. If you're likely to take much longer than this, the Citi card starts to make more sense.

You're still paying interest!

As long as you've had your `lightbulb moment' and stop spending, a lifetime balance transfer card can give you some important breathing space to get your debts under control.

But it's important that you still pay off your debt as quickly as possible. Even a rate of 4.9% can add up to a lot of money if you only ever make minimum repayments!

More: Credit Cards For All Occasions | The Best Credit Cards To Use Abroad

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