Be as savvy with your cards as you are with investments

If you’re the sort of person who prides themselves on being able to spot a good investment, and having an eye for being able to make and save money then you’ll probably also be adept at managing things like credit cards.

Not everyone is as savvy, however, and instead stick with their current credit card which carries an uncompetitive rate when they could benefit from shifting the balance to a lower rate card using a balance transfer.

If you’re now thinking: “Wait a minute, what is the rate on my credit card?” then you might be costing yourself money by not moving the outstanding balance to a lower rate balance transfer credit card.

Some savvy credit card users take advantage of promotional interest-free periods and find that by the end of that 12 or 18 month interest-free period they still owe a certain amount. What they then do is use a balance transfer to another card before the promotion ends and the rate goes up to the standard rate – which is usually between 12 and 20 per cent.

Watch out for the catches

Taken to its extreme this sounds like a way to pass the book and never get around to paying the balance, but this would be an irresponsible way to use a credit card, and probably wouldn’t be viable anyway.

There are occasionally fees attached to balance transfers, where the provider will ask you to pay for the service of transferring the balance from your old card to their card.

You should also be aware that repeatedly taking out new cards and transferring the balance can potentially have an adverse affect on your credit rating.

Your credit rating is an indication of how reliable you are in terms of paying off your debts, and constantly shifting the balance to a number of cards without paying anything off reflects a poorly-disciplined borrower.

You should also check out the details of the card carefully to make sure it is suitable for you. For example, some cards might offer rewards on purchases in exchange for a shorter interest-free period. If you need longer to pay off your balance and you don’t intend to spend on the card, then you don’t need the rewards perk and you don’t want a shorter interest-free period.

In fact, if you’re making a balance transfer to a new card in order to give yourself a fighting chance of paying off the balance, rather than just hacking away at the interest, then you’d be well advised not to make any purchases on the new card at all.

Of course credit cards are certainly not for everybody, and you should think carefully about your ability to pay back what you borrow before signing up for one.