PLATINUM OR GOLD: things to watch out for when switching cards

Switching to a card with a lower introductory interest rate may increase the eventual cost of your repayments if the balance you transfer is not cleared before the end of the introductory period, the consumer director of the Irish Financial Services Regulatory Authority (IFSRA), Ms Mary O'Dea, has warned.

Taking advantage of special balance transfer offers can help consumers reduce their monthly credit card repayments if they have built up a large debt on their existing card.

But these offers usually only last for a maximum of six months, at which point the outstanding balance will start accruing interest at the card's normal annual percentage rate of interest (APR).

"Consumers should carefully work out how much their repayments will be over the introductory period if they move their existing balances to a new card," Ms O'Dea says.

Cardholders should try to clear their debt before the end of the balance transfer period, IFSRA advises.

The consumer watchdog's credit card cost survey shows that balance transfer interest rates can be as low as 0 per cent for six months (AIB) or 2.9 per cent over 12 months (Bank of Ireland).

It is important to remember that the balance transfer rate only applies to the debt moved to the new card. The rate of interest on any further purchases will be the standard double-digit one.

Not every balance transfer introductory offer works in the same way, however.

In general, any lodgement cardholders make will be taken off the balance transfer amount first, with new purchases racking up interest at the higher rate until the transferred money is cleared.

So unless cardholders curb their spending habits, the balance transfer rate can effectively expire well before the six months are up.

AIB is one exception to this rule: it credits lodgements against cash advances and purchases before it eats into the transferred balance.

This is more advantageous for cardholders, as customers have a 0 per cent six-month comfort zone on the debt built up elsewhere, regardless of how many new purchases they make.

Consumers who have no debt to clear but want to avail of low interest borrowing should look for introductory offers on new purchases.

Tesco Personal Finance and Ulster Bank's zinc card give a rate of 0 per cent for six months, as does Bank of Ireland as an alternative to its balance transfer offer. National Irish Bank also gives 0 per cent on new purchases for five months.