Play The Great Credit-Card Shuffle!

Crafty cardholders have saved billions by playing the interest-free game. Here's how to join in.

Over the past year, around 8½ million people have taken advantage of the 0% balance transfers on offer from credit-card companies.

A recent survey from MoneyExpert reckons that about a quarter of all 33 million credit cardholders have shifted existing balances to a new credit card in the past twelve months. They've done this in order to enjoy an extended interest-free period which can last a year or more. This research reveals that cardholders have transferred an average of £764 apiece, with the total adding up to a mighty £6½ billion, or more than a tenth of our total card debt.

Given that the average credit card charges an annual interest rate of around 16% APR, this means that the total interest avoided could total as much as £1 billion a year. This lost revenue explains why many of the best balance-transfer deals now come with transfer fees attached, typically 2% to 3% of the value of each transfer. Hence, a balance transfer of £2,500 could attract a fee of between £50 and £75.

What's more, in a bid to cut their interest bills to size, around 1 in 25 cardholders (4%) have used balance transfers to avoid interest on some pretty hefty debts. The research estimates that over 1.4 million people have transferred plastic debts of £5,000 or more, saving themselves hundreds (even thousands) of pounds in needless interest.

However, the fact that so many people have balances of £5,000+ shows how widespread the UK's borrowing binge has been. Across the UK, the average credit-card debt is around £2,250 per household, so these balance-switchers are among the biggest borrowers in Britain. Perhaps they've failed to realise that even interest-free debts need to be repaid one day?

Of course, the obvious upshot of this research is that three-quarters (75%) of credit cardholders haven't made use of 0% or low-rate balance transfers in the past year. Then again, around half of all cardholders pay their monthly bills off in full, so they have no ongoing debts to transfer in this way. Nevertheless, there is still ample opportunity for millions more cardholders to join in the fun and, in doing so, take a well-earned breather from paying sky-high interest rates.

If you'd like to jump on the 0% transfer bandwagon, check out these Best Buys:

Best Buy 0% balance transfers

Source: The Fool's credit card search engine, 19/12/06

Finally, one word of warning: if you transfer balances to a 0% credit card, be sure not to use it for spending. Otherwise, you'll most likely pay interest at standard rates on all of your purchases, so don't take balance-transfer cards to the shops with you. Also, be sure to check the small print for any extra fees and charges (including minimum and maximum transfer fees) before signing up!

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