Credit Card Debt.

Some credit card issuers are probably not going to like us saying this, but when you are in a poor financial position, we would recommend that as soon as you receive your new credit card, you should cut up.

Why? Well this simply makes it impossible to spend any money using that card. When you have paid off the balance transfer amount in full, you can always call up your card issuer and ask them to send you a new credit card.

If you must make purchases using a credit card, you are better off using your old card. If instead, you chose to use your new credit card, the debt added onto it will usually not be eligible for the 0% offer interest rate, but a higher purchase APR. For more information on the different types of interest used with, please see our explanations of interest rates.

Consider an example. Suppose three months after taking out your new credit card, you need to buy £500 worth of clothes before starting a new job. You have £2,500 outstanding on your 0% transfer and nothing outstanding on your old credit card. You intend to use your first two pay cheques to clear the £500 new balance.

Let us say that you spend on your new credit card, increasing the balance to £3,000. When you pay off the £500, this will leave a transfer balance of £2,000, and a purchase balance of £500. The purchase balance of £500 will then attract interest at the card issuer's standard rates, until the full balance, including the balance transfer, has been paid off. If this takes a year, at a typical APR of 15%, you will end up paying £75 interest on this purchase.

If instead you were to use your old card, you will only pay interest for the few weeks that you have an outstanding balance. Once you have paid the £500 off, there is no further interest to pay. The £2,500 outstanding on the new card remains at 0%. In this example, you will have saved £75.

If you are still unsure and would like further information, we take a detailed look at the different types of credit card interest rates available.