Millions of consumers every year take advantage of 0% balance transfer and purchase credit card deals as a way of cutting debt and getting back on the financial straight and narrow.

By the end of the January it was estimated that 1m people transferred their credit card balance to a new provider as part of their financial spring-clean. Borrowers will have switched an average of £2,666, according to research by Abbey bank.

By moving to a 0% balance transfer card, borrowers can shave hundreds of pounds from their interest repayments. At least, that is the lure. But switchers can be hit with high fees to move a balance, and those who then spend on the new card could get further nasty shocks.

This is because with the majority of balance transfer card offers, interest will be charged at a higher rate on new spending than on the switched balance. And worse, most card providers require borrowers to pay off a transferred sum first before clearing any new spending.

Another problem arises because some of the card providers give customers a 10% buffer on top of their credit limit - to avoid the embarrassment of having a card declined in shops and restaurants.

But this buffer makes it easy for customers to exceed their credit limit, be hit with a £12 penalty fee and again lose any 0% promotional rates. Moneysupermarket says consumers should be given the option to state that their credit limit should be just that - the credit limit. Cardholders who spend on a 0% balance transfer card can also be stung if the card does not also offer 0% on purchases, because any new spending will be charged interest at the higher rate. This is known as ‘negative order of payments’.

Nationwide Building Society and Saga are the only major card issuers to operate a positive order of payments. Nationwide offers a 0% balance transfer deal for 10 months and 0% on purchases for three months. It charges a 2.5% transfer fee.

With a positive order of payments, card repayments always go towards paying off the most expensive debt first.

Samantha Owens at independent data compiler Moneyfacts says: ‘The main message for borrowers transferring a balance is always to read the small print and check out the way interest will be charged if you intend to spend on the card. Consumer groups say card providers that operate this policy should make the situation clear to customers in bold on card statements.

Meanwhile however thousands of borrowers are being stripped of their promotional 0% credit card deals because of harsh rules laid down by banks and card issuers that are buried away in the small print.

The Office of Fair Trading last week published a report into credit cards. It says the market remains too complicated, opaque and difficult for borrowers to compare deals.

Among its recommendations the OFT says that summary boxes, which contain the interest rate and other payment information about the card and appear on all statements, should be standardized and made more user-friendly.

Transferring a balance to a 0% card can easily turn to disaster when consumers do not understand the rules.

Estimates suggest about one in ten cardholders do not realise that after taking out a 0% deal they must still pay the minimum repayment each month. This is typically 2 or 3% of the balance.

Instead many consumers mistakenly think ‘interest-free for 12 months’ means nothing to pay for 12 months. As a result, when they receive their first statement, instead of making the minimum monthly repayment they pay nothing.

Most card providers impose a £12 penalty on customers for the missed payment and the 0% promotional offer is withdrawn immediately - known in the industry as ‘default and lose’. Capital One and Lloyds TSB are among the few card issuers that allow customers to make such a mistake once before withdrawing the 0% rate.

The card and loan comparison website moneysupermarket is campaigning for card issuers to make the rules of 0% deals clearer.

Steve Willey, head of credit cards at moneysupermarket, says: ‘Card companies are making a vast amount out of unwary customers, the majority of whom have made a genuine, one-off mistake.

‘Providers could avoid criticism by explaining in bold in the letter of introduction to new customers that they must pay the minimum monthly payment.’

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