6 Mistakes That You Need to Avoid With Balance Transfer Credit Cards
A credit card is one of the most useful financial products that help the cardholder to make various types of credit arrangements. With the increasing demand, the majority of the banks and financial institutions now offer credit cards for specific types of needs such as shopping credit cards, travel credit cards, lifestyle credit cards, and many more.
With this financial tool, the most important factor is to know the art of spending and maintaining a good credit score by making credit card bills on time. However, using a credit card inappropriately and failing to make repayments on time might leave you with accumulated debt at a high interest rate cost.
So, if you are also one of those people who have trapped into a credit card debt and looking for an apt way to get rid of it, then you should opt for a balance transfer credit card. It is basically a type of credit card that enables the card members to transfer their existing high interest outstanding debt to a card with a lower introductory rate and helps in consolidating debts. In short, balance transfer credit cards are indeed a great opportunity to save money on a high interest rate outstanding balance.
However, just like with any other financial decision, you might make a mistake during a balance transfer due to the utter pressure of bills and it may end up increasing your financial burden rather than helping you to consolidate debts. So, in order to assist you in the same, we have mentioned some of the common mistakes that few people do in balance transfer credit cards and how you can avoid them.
Some Common Mistakes That You Should Avoid While Going For a Balance Transfer
1. Not Going Through the Fine Print Carefully
Without any doubt, the fine print of any financial document is loaded with plenty of legalese that you will need a good amount of time to grasp but that does not mean that you should completely ignore them. There might be some important information that you could miss out by not understanding them carefully and you will have to pay for this in the future. That is why, it is highly recommended to look out for caveats & grey areas in the fine print and contact the bank or lender if, in case, you need to clear your doubt regarding the same.
2. Using Balance Transfer Credit Cards Unnecessarily
While using a balance transfer card help in reducing your financial burden, one thing that some people often ignore during transferring a balance is that banks or lenders levy a charge is equivalent to 1-2 percent of their card’s outstanding amount. You might end paying more in light on consolidating your debt if you make such mistakes in using balance transfer credit cards.
So, before choosing this option, you should work out on paper to know if the balance transfer turns out to be less expensive than the amount you are incurring by paying your outstanding balance with other credit cards. The balance transfer fee may not matter if you are looking at spreading out the cost of your outstanding debts and clearing them over a considerable time period.
3. Trying to Transfer a balance between Two Credit Cards of the Same Lender
Before you think of transferring your outstanding balance between two cards of the same lender, it is important to keep in mind that banks do not authorize balance transfer between their own credit cards. It might be a little tricky to understand but it is one of the most important things that you should aware of. In fact, many people often unknowingly attempt to transfer an outstanding balance between two cards of the same lender without giving a second thought but this is where they are making a mistake. This is because if banks or lenders enable their already existing customers transfer their outstanding amount balance b/w their own cards then they will certainly be losing money on interest charges and no bank will want to lose money on interest charges.
4. Adding More Debt to Your Old Credit Card
Once you have finally decided to opt for a balance transfer credit card, make sure you don’t add more debt to your old card because that would simply mean that you’re getting right back at the position you began with. If, in case, you will not be able to clear your outstanding debt, then you will begin incurring interest on it again. This will ultimately leave you with two outstanding debt payments at the end of each month. So, make sure you don’t make such a silly mistake when you opt for a balance transfer card.
5. Making/Defaulting Late Payments
Balance transfer credit cards may significantly reduce the burden of monthly installments. But, if you are going to follow the old ways of missing your payments and not making a repayment on time, you would be certainly defeating the sole aim of a balance transfer. Just like making late credit card bill payments take a toll on your credit rating, your balance transfer will also be significantly affected negatively by making late payments. You would have to pay a double-digit rate of interest as an outcome of missed payments. Not only this, even to eligible for a balance transfer, you would also require a decent credit score and that would not possible if you keep on missing payments.
6. Not Having an Adequate Debt Repayment Plan
Well, planning for things in advance comes off as a plain-sailing part before an unfortunate situation. Some people might ignore the importance of planning in advance and then regretting their decision later. A low rate of interest can be a good opportunity to clear your debts once & for all. But it is imperative that you make an adequate debt repayment schedule for it. Evaluate all of your monthly payments that you will be making and make an apt repayment schedule for the same. This will certainly help in paying off your outstanding debt in a hassle-free manner.
In a Nutshell
We hope that you will avoid all the aforementioned mistakes while using balance transfer credit cards. If used wisely and responsibly, it is indeed a good way to consolidate your high interest outstanding debt at a lower interest rate. This will certainly help you to save money and consolidating your debts in a hassle-free manner.