Still Playing the Switching Game?

By: Elisha Burberry

High street bank Abbey estimate that 6.5 million cardholders will transfer a total of ?11 billion this year to other credit cards offering similar or better deals. The majority of those switchers will be what is charmingly referred to as "rate tarts" by those in the industry, but more and more of us are switching in order to get better benefits from our plastic such as loyalty rewards, rather than chasing zero-balance deals.

It didn't take long for banks, building societies and other financial institutions to get fed up with the credit card switchers; those who religiously transfer balances to new cards once their interest-free offer periods expired. So, in order to recoup some of the set-up costs from those who have the discipline to not add any more debt and merely move their balance elsewhere at the end of the promotional period, the transfer charge was introduced. By charging up to 3.5% of the balance amount as a transfer charge the credit card issuers will add an estimated ?330 million of revenue to their coffers, and go some way to recouping the cost of offering interest-free loans.

However, transferring balances you can't pay off now merely postpones the day when it must be finally repaid. Although it is still better to transfer balances to interest-free offers rather than suffer the double whammy of high interest and minimum payments, which would result in paying off the debt for many years. Even if it's not possible to transfer the balance to a zero-interest offer finding a card that offers a lower Annual Percentage Rate (APR) than any existing cards you may hold is also worth doing.

But, there are many other reasons why people switch credit cards other than chasing 0% or low rate deals. Perhaps you fall in the 55% of the population that, according to Marks and Spencer research, pays off their credit card bill in full each month? Then you may be looking for a reward scheme that offers the best deals; air miles, cash back and various rewards points systems are all popular schemes. Depending upon how much you spend each month and whom you spend with, one deal may be worth much more to you than another; it's definitely worth making a direct comparison.

Or perhaps you favour any benefits that may accrue on your card going to charity? There are plenty of charity credit cards on the market, each promising to donate to a host of worthy causes from helping eradicate child poverty to aiding the RSPCA. And although not strictly charitable, other affinity cards such as those issued on behalf of favourite football teams will allow you to ensure that your favourite team gets any benefit from your spending.

There are many reasons for switching your credit card, but in this day and age of highly competitive offers it pays to shop around to ensure that your wallet is in the best shape it can be; and that you are getting the best deal whatever your motivation for the change.

Debt, Loans & Business Cashflow
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