Econ Info

Balance transfers can be a good way to knock off your debt but only if you’re concentrating on paying off what you already owe and not looking to add any more.

Remember, the point of doing a balance transfer is that you’re trying to consolidate your credit card balances or pay off your original debt using the introductory less or zero promotional interest rates on a new card than what you currently owe your present credit card company.  Many credit card companies offer zero or less interest rates to encourage you to bring them your business.  Here’s how you can use this option to your best advantage:

You Don’t Have To Make A Change. If you have a good payment history to begin with, then you can actually negotiate with your credit card company if they can give you a lower interest rate.  Consult with a manager or supervisor and request if you can get an interest rate lower or similar to the one you’re considering switching over to, especially if you have always been responsible in making your payments and have been a customer in good standing with them.  No one wants to lose out on a good business relationship and there may be special offers available that they can give you so they can continue to have you on as a customer.  You don’t have to start over with a new company.  Constantly changing credit card companies because you’re constantly bouncing your debt around can badly affect your credit score and do damage to your credit history in the long run.

Pay It On Time. If you constantly forget to pay your bills on time, then balance transfers are not for you.  If you miss out on a single payment on the balance transfer, then you’ll be triggering the interest rates and you’ll be back to square one – paying off the interest rather than the original debt.  To get the best use out of the low introductory or zero rates on balance transfers, pay your debt on time and know when the promotional period for the deal will end.  You can resolve your debt quicker if you consistently pay more than the minimum amount due and save yourself from the high interest fees.

Read The Fine Print and Shop Around For the Best Deals. Your attention may be captured by the big bold promotional offers but make sure you know what you’re really getting into.  Look for balance transfers offers that offer the lowest possible introductory rate for the longest period of time, have low post-introductory interest rates, as well as no or low annual and balance transfer fees.   Beware misleading offers where not everyone can qualify for the low rate due to credit history.  Know if fees are only waived for the initial balance transfer but will charge for the succeeding ones or consider these as cash advances with a higher interest rate.  Be aware about the universal default where a single late payment can cause your APR (Annual Percentage Rate) to rise dramatically, how long you can keep the account before being allowed to transfer again and the interest rate for new purchases.

Confirm and Make Sure You Have Correctly Performed the Transaction. Always make sure you’ve filled out the necessary forms or gone through the required processes because if you have not correctly performed the balance transfer, the delay can cost you more.  Continue to pay the minimum with the old card until you’ve confirmed that the balance transfer has been approved with the new one which can take around two to four weeks to process.  Always make sure that the balance transfers have been completed with both your old and new credit card companies.

Concentrate on Paying Off Your Debt. Often, you’re charged a higher interest rate when you make new purchases on your new card.  Concentrate on paying off your original debt first and don’t add any more.  Cancel your old credit card – it is better to have one single credit card that you are using wisely rather than have several debts on multiple credit cards.   In the long run, this will reflect well on your credit score and history and allow you to be eligible for better credit deals.

Tags: Balance Transfers, Credit Cards