Credit Card Repayments
Order of repayments
Something else to look out for on balance transfer deals is the order of repayments. When you make a payment to your credit card company, it will usually pay off the part of your balance with the lowest interest rate applicable first.
your transferred balance charged at 0% will be paid off before any purchase or cash withdrawals you have made, which means they will be left to accrue interest at their higher rate. This is another reason why it is not a good idea to use a card taken out on a balance transfer deal for new purchases or cash.
While most credit card companies already ordered repayments in this way, some that didnít before, including HSBC and First Direct, have changed their policy to paying off the cheapest transactions first since the OFT capped default charges.
Before choosing a balance transfer deal itís essential you look at all aspects of it and not just the headline rate or length of the interest-free period, including the purchase and cash interest rates that apply, whether a balance transfer fee is applicable and, if so, whether itís capped, any other fees that apply and the order of repayments.
Itís also important to consider your needs Ė whether the credit card company charges a balance transfer fee on a particular deal may relate to how long the interest-free period is, so consider how long it is likely to take you to pay off your balance to work out your criteria.