Balance transfers let you move your debt from one card operator to another, usually in return for a fee that is a percentage of the debt.

It all started back in December 2000, when Egg launched the first 0% fee-free balance transfer deal in a bid to win customers over to its cards, launching a deluge of cheap credit on to cash-hungry customers.

Other banks soon followed Egg’s lead, starting a carousel of debt transfer as people switched from one card to another, never having to repay what they owed because they simply moved the debt from their existing card to another lender. Some lenders even let you withdraw cash with your card and then move the debt on, paying no interest on the debt and leaving you with a huge sum to spend - or even with the possibility of placing the money in a high-interest account and actually making money on it.

Madness. One might have guessed it would end in tears, and to some extent it has, with many consumers unable to pay off their bills and being faced with swingeing interest rates if they don't repay what they've borrowed.

Over the past few months good balance transfer deals have been drying up more quickly than a net curtain in a tumble drier. Free balance transfers are long gone, fee transfers are in, and fees have gone up – standing typically now at around 2.5% to 3% of the amount transferred.

However, competition is still rife in the credit card market and interest-free periods seem to be increasing, albeit at a cost.

The downside is that balance transfer fees have increased, with many being uncapped, and lenders have tightened up their credit-scoring criteria, so you need an almost spotless credit history to get your hands on one of these deals. If you do, the interest-free limits will be far smaller than they used to be.

Life of balance cards

If you don’t want to be on a permanent merry-go-round of balance transfers, consider a good “life of balance” offer.

These cards charge you a low rate of interest instead of a zero rate but don't charge a transfer fee.

The golden rule is 'Never spend on a balance transfer card'

Finally, the golden rule with balance transfer deals is that you must never spend on the card during the 0% period. Lenders, with only one or two exceptions, allocate repayments to the cheapest interest first, so if you spend on the card as well as making repayments you could find the amount you owe rising as interest continues to rack up on new spending, while the interest-free debt is repaid.

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