12 Not-To-Miss Tips While Using Balance Transfer Credit Cards
It can be a great financial move to transfer your credit balances using balance transfer credit cards. This facility can help you find a way out from the steep rates of interest and allow you to have a fresh start on making your payments on time.
Some balance transfer credit cards even have 0% or minimal introductory rates of interest that can help you in paying off your outstanding debt easily and quickly. With that being said, transferring your credit card balances is a tad bit complicated procedure that you should be having more knowledge of before going ahead with this facility on your credit cards.
Here are some tips to help you figure your way out before you step into this journey.
Your Debt Will Rise Before It Falls
Back in the day, transferring one’s balances used to be offered at a rate that came with a capped maximum fee. In today’s age, these caps are no longer there. If you are holding a small number of outstanding balances, then this might not be such a big deal for you. However, if you are holding quite the three-digit number in your outstanding dues, the transfer fee can add up quickly turning into quite an amount. It is almost unavoidable but you should be sure to know the amount that is likely to be added back to your existing debt when you are going to transfer the balances.
The Introductory Rates Might Be a Trap
Like it was mentioned before, some balance transfer credit cards come with rates of interest that are as low as 0% or minimal for a fixed introductory period. They are generally likely to last for about 6 to 12 months. If you think you will not be able to pay back your outstanding balance before this introductory period is over, then you should keep a lookout for the original rate of interest that is charged by the card provider. These rates can go quite up depending on your credit. You should sit down with a calculator at hand and then get down to calculating the actual amount that you will be saving if you go ahead with such a transfer – trust me, you’d be doing yourself a favor if you calculate this amount!
If You Fail To Pay Your Dues, Your Provider Will Make You Pay In Other Forms
While we are talking about introductory rates, let’s get into discussing what will happen if you are unable to pay your bills. Mostly all of the balance transfer credit cards will have your introductory rates canceled and slam you with the regular rate of interest if you are unable to honor payments on time. You should always remember there is no grace period offered on the balances of cards. So, do not skip any monthly payment, or it can end up costing you.
Don’t Overlook Your Debt While Transferring the Balances
The procedure of transferring your balances from one credit card provider to another can take up quite some time. The experts in this field say that it can take almost a month and sometimes even longer for this procedure to be completed. During this period of transfer, you still have the responsibility of paying your monthly bills on your shoulder. The consequences of not paying your bills on time have already been mentioned so it is best not to sabotage yourself.
The Best Rates Are For People with Good Credit
Sadly, the people that have bad credit in most cases are not offered the same features on new balance transfer credit cards as compared to what the people out there with good credit are offered. You may come across credit cards that constantly emphasize them offering low introductory rates but if you have bad credit, these rates are probably not for you.
It is not uncommon for an individual with bad credit to be forced into resorting to balance transfer credit cards that offer less appealing features such as higher APRs overall and no introductory rates. One can always try and apply for things such as the introductory rates but should not base their financial future on the features on credit cards that they are unlikely to qualify for.
Increased Introductory Rate Confusion
Some of the credit card providers out there will only give you the introductory rates for the exact amount of the balance you hold. This means that any expenditure that you incur could be exposed to the original APR charged by the company. For instance, let’s say you transfer the balance that is equal to AED 3,000 to your new card and then you go out and purchase a laptop worth AED 500. The AED 3,000 would be eligible for a 0% interest rate whereas the laptop purchase will be subjected to the original APR charged.
Don’t Become a Transfer Junkie
Once you have read through the above and reached here, you might already be thinking of getting any of the balance transfer credit cards that offer introductory rates and then transfer any balances to a new card of the same sort in a year. It may sound like a good plan to you but you can be penalized for doing this. As we know, paying off credit card dues is good for your credit score, and doing anything to prevent this can actually be counterproductive.
Cut Up Your Cards
This is not quite the technical tip but a figurative kind. Because of the increased confusion and the complexity involved in balance transfer credit cards and the balances, it is probably in your best interest for you to just slash your cards. The accounts linked to the cards can be opened but to face the reality if you are someone who is in a situation that is needing you to resort to the option of transferring your balances, it is best not to give yourself any sort of opening to make this situation worse. Cut up your cards, get to paying off your entire debt, and most of the problems discussed above will not even apply to you.
Spend Time in Finding the Best Deal
This actually applies to anything you ever wish to buy. For instance, it might sound great to find a credit card that offers a 1-year introductory rate of 0% but it is worse to end up paying 18% APR once this period is over. There could be a card out in the market offering you a flat rate of 12% that might be more feasible in the long run. Do the math, browse around, and find deals that help you in saving money in the long run. Do not resort to a bad deal only because the introductory offer is appealing.
Do Not Try Too Hard or You May Never Get It Done
Just as it is with any loan procedure, applying for new balance transfer credit cards requires a credit check. Most of us are aware that if you ping your credit numerous times it will start to decline. If you are unable to secure a decent credit card even after trying multiple times, it is best to let it be and try again after a couple of months in order to avoid any harm being caused to your credit. Otherwise, you will end up hampering your credit and your chances of getting any card.
If You Don’t Cut Them, Don’t Spend On Them
It was earlier suggested to cut your cards and we still stand by that. However, we also know that you might want to keep an extra option lying around for any emergencies. If you decide to not cut your cards and keep them around, it is recommended not to spend anything apart from what is absolutely necessary.
Consider What Put You in This Situation in The First Place
If you are resorting to transferring your balances from existing cards to a new one, you probably are in some kind of trouble. Generally, the 2 main reasons why people transfer their balances are either to switch to a card offering lower rates or because of some problems occurring with the present card. In either of the cases, you should dig deep to figure out what the actual problem is.
If you are facing trouble paying the balances right now, you will have trouble later in the future as well. Fix the underlying issue and you may end up avoiding the entire mess.
Wrapping it up!
The end line is to stay educated. Make sure to read the smallest thing before signing on any paperwork. There are no shortcuts in fixing your finances, so get it done as soon as possible!