3 Ways To Avoid The Worst Credit Card Trick


Updated on 16 December 2008 | 0 Comments

Credit-card companies make millions from us with this devious trick, even if we believe we're on a 0% deal. Here are three ways to avoid it.

In 99% Of Credit Cards Use This Dire Trick, I explained how credit-card companies manage to charge you loads of interest, even if you have a 0% deal running.

Provided you don't use your card for cash advances (e.g. withdrawing cash) or credit-card cheques, you can avoid that trick, called 'negative payment hierarchy' if you pay off your bill every month. We hope you do that! If you can't do so, though, here are three ways to get around it.

1. Use different credit cards for different types of debt

Usually, credit cards offering 0% interest have different length deals for balance transfers and purchases. You might, for example, get 12 months interest free with balance transfers, but only 3 months for purchases. If you make a new purchase and do a transfer, any repayments will first go to the transfer. This means that after three months, if you haven't completely cleared your balance, you'll start paying interest on the purchase.

Therefore, if you want to make a new purchase and transfer a balance, the best way is to use two different credit cards. By keeping your debts separate, you can use 0% deals without worrying about interest.

The very best cards in the whole market for 0% balance transfer deals right now are:

The very best cards in the whole market for 0% on new purchases right now are:

Note: at present you don't pay a fee for making 0% purchases.

2. Use 0% cards with two deals of equal length

Alternatively, you can choose credit cards that have purchases and balance-transfer deals of equal length. You can find a selection here. The very top cards with equal length deals at present are:

Obviously using one credit card is nice and convenient, but the downside to these cards is that the deals tend to be shorter.

3. Get credit cards with flat rates of interest

Switching between 0% credit cards saves most people a fortune in interest, but if you have had enough of this, you could get a credit card with a low rate of interest on both purchases and balance transfers. Make sure that the interest rate is the same on both. The top such cards at the moment are:

Sadly, these are all typical interest rates, so you might not receive them. Furthermore, the rates are all variable, which means that the lender could increase them at any time!

If you're going to pay interest anyway, you should consider getting a personal loan instead, most of which have fixed interest rates. Disciplined Fools should look for loans where you can overpay without penalty, and those who are less good with their money should look for loans with fixed payments.

> Compare credit cards through The Fool. Also, you can easily see whether you can overpay on a personal loan using our unsecured personal loan search.

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