A balance transfer can be explained simply as a balance 
transfer ! When a balance is transferred usually from a credit 
card, but possible from a bank account or loan to a credit card 
with a offer interest rate (usually 0%) for a set period. It 
does not have to be the entire amount. The card receiving the 
balance will an interest rate for a set term, normally 6 months, 
but can be 9 months or even a year. Take a look at the current 
credit cards with balance transfer deals:
(http://www.search4-credit-cards.co.uk/balancetransfers.html).


Should I apply for a balance transfer ?

It is important to remember that a balance transfer does not 
mean that the debt has gone away. It just means you are not 
paying interest on it. You will still have to maintain payments. 
This may seem obvious but many people do not get this straight 
in their mind. The basic criteria for getting a balance transfer 
is when you regularly have an outstanding balance after making 
your monthly payments. This is the amount you should look to 
transfer to another card. This will mean that for the period of 
the offer you will pay no interest on the balance (provided you 
make the minimum payments).

You should be very wary of taking up a balance transfer, if your 
overall debt is increasing. A balance transfer is not a green 
light to spend more money. The money you save should be used 
to decrease your debt.


What should I look for in a balance transfer ?

You need to be aware of the following when looking for a 
balance transfer card:

Good things

 - Length of offer period

 - The amount of time your transferred balance is subject to 
   the offer rate

 - Offer Interest Rate

 - The zero or low interest rate charged on the balance
 - Possible transfers from loans and overdrafts

 - On some cards you can transfer from existing loans and 
   overdrafts and still get the offer.


Bad things

 - Hidden Charges on transfers

 - Some banks will charge a handling fee on the balance 
   transfer.

 - How long the offer is valid for ?

 - There is usually a cut off point from the account opening 
   when the offer is no longer valid. Be very aware of this 
   otherwise you could end up transferring a balance to a 
   higher rate !!


What about new purchases ?

Unless there is also a 0% interest rate on new purchases then 
you should avoid making new purchases on a balance transfer 
card. This is because the banks will look to reduce the balance 
transfer debt quicker than the new debt. Provided your credit 
history is reasonable, there is nothing stopping you having 
several cards for different purposes. A good way is to have a 
card, which specialises in 0% on new purchases 
(http://www.chooseacreditcard.co.uk/0purchases.html)
and another card for balance transfers.


What happens when the balance transfer period finishes ?

When the balance transfer offer period finishes the debt will 
revert to the typical variable APR. The lenders hope at this 
point that the cardholder will retain the card and some of the 
debt, so they can then start charging interest and making some 
money! So take into consideration the lowest interest rate 
credit cards (http://www.chooseacreditcard.co.uk/lowapr.html).
However, there is nothing stopping the disciplined credit card 
holder from switching to another balance transfer deal and 
closing the account. The cycle then starts again. Always allow 
6 weeks to 8 weeks before the end of the offer period to apply 
for a new card. This means you can get the balance transferred 
to the new card before the lender can start charging the higher 
rate. You have to be organised to do this, but if you are it 
does work. People who regularly switch balances are know as 
card tarts.


What's the catch ?

There are three things to look out for with a balance transfer 
card:

 - As mentioned previously, the unsuspecting can get caught 
   out when spending on a balance transfer card.

 - Maintaining regular payments. If you miss a payment you 
   incur some penalty, so be aware. To be safe set up a direct 
   debit.

 - The interest rate applied when the offer period finishes.


Good luck with your choice. 

Neil Brown is a freelance writer who makes regular contributions 
to the sites http://www.search4-credit-cards.co.uk and 
http://www.chooseacreditcard.co.uk .