Honeymoon period credit cards - everything you need to know about honeymoon rates

Some credit cards now offer honeymoon periods to attract customers. These are period of months where you have to pay low, or no, interest of what you have borrowed, and they often used for balance transfers, but there are dangers to this scheme.

Balance transfers

If you owe debt on a credit card with a high interest rate you can sign up for a new credit card which offers a honeymoon period and pay off your high interest debt with this card, meaning you have less to pay off. The basic idea behind this is a powerful one, and it is a quick way of making a debt much more manageable. However, it can help to make a plan of repayments and stick to it strictly, to avoid the dangers that follow.

Reversion rate

After this honeymoon period the card will revert to a set rate of interest. While you can, in theory, cancel the card at this point it is important to look into this rate. This is partly because a customer who cancels a credit card on a regular basis is unlikely to be granted a new card.

A high reversion rate can also be problematic in a more serious way, and can catch out those who have failed to pay off their debt. Many companies will force you to pay off the low interest loans before the high interest ones, and this means that those high interest loans rapidly accrue interest and can cost you a large amount of money.

The good and the bad

Obviously, a honeymoon period can benefit the card holder by providing you with a low interest loan and giving you access to a credit card. If these cards have a reasonable rate after the honeymoon period then they can be beneficial.

However, especially when transferring debt from one credit card to another, a honeymoon period can be dangerous, as it may make you feel more comfortable spending more money and taking longer to pay off your debt. This makes it easier to build up a large outstanding debt and can cause problems in the long run. This situation can become more problematic if you are not a controlled spender and do not keep spending to a level that you can handle.

In the end, a honeymoon period can be beneficial, but it does depend heavily on how you make use of the card.