If you have credit card debts then you will know how frustrating it can be to see your hard earned cash get eaten up every month by the interest and charges applied by your lender. Paying back a typical minimum repayment of £100 on a £5,000 debt means the likelihood is you are only actually repaying around £20-£25 per month back, the rest is going in the bank's pocket. Now in this circumstance most of us would look for another card to transfer the balance to and get those 0% deals which gives you an opportunity to repay your actual debt off and not the interest, but what if you have exhausted all your credit card allowance and nobody will give you a new one?

Credit Card Balance Transfer Cheques

Some lenders such as Virgin and Lloyds TSB now provide 0% balance transfer cheques to existing customers enabling you to transfer a balance to your existing cards and save money. This seems like a great idea as you don't have to apply for a new card with a new lender and go through the lengthy process of filling out application forms again. It's really simple, a batch of cheques arrive in the post, all you do is fill one out to the company you want to transfer the balance to and hey presto! You have transferred a balance to your existing card without having to reapply for a new one. You can even write a cheque to yourself if you are a bit short of cash, All sounds great doesn't it? Or is it?

I am now 30 years old and after being in debt for most of my twenties I was constantly looking for solutions to get myself out of debt. When I first came across credit card balance transfer cheques I thought what a great idea! I was soon to realise this was not the case. After using the cheques and doing numerous balance transfers in order to save money on interest I soon realised... I wasn't! I was still paying interest! This is because lenders will only send you 0% balance transfer cheques when you have a debt already on the card. For instance, if my limit is £5,000 the bank would always send me cheques when I had used about 50% of the limit. (with around an outstanding balance of £2,500).

Let me explain a little further...

If you have a balance on the card which you are paying interest on and then you use a balance transfer cheque to move a balance over, you will still be paying interest on the existing balance that you had, not only this but the balance you transferred over will be paid off first and you will be stuck paying the FULL amount of interest on the existing balance you had.

Balance transfer cheques work like a stacking system. The bank will only send them to you when you have a balance on the card, that way when you use them to do a balance transfer it 'traps' in the existing balance and pays of the transferred balance first, forcing you to pay the full amount of interest on the balance that was already on the card, so instead of chipping away at your debt, your will end up getting deeper into it! Sneaky eh?

What's the point of using them then?

Well there is a way to use them to your advantage. You have to have enough funds available to clear the balance off in full at any given time. This is so when there do arrive in the post you can clear your balance to £0, then do a balance transfer so the card is completely clear to start with and there will be no existing debt to pay interest on.