Balance transfer is one of the best options to get out of credit card debt by transferring the balance from the high interest card to the low interest or even a 0 percent one, subject to terms and conditions. These terms and conditions are usually with respect to the time frame in which the low or zero percent interest period can last, also known as introductory period. Here are top 10 balance transfer tips that can help you in reducing debt and saving a lot of money
1. Research for the best deal – Do not fall into the gimmick trap but do your own research to find out if the balance transfer offer is worth it. For instance, some balance transfer offers may be for a short-term and that also with substantial fees. In some cases, the rate for new purchases may be quite high which means if at all, you use it for purchases, there is a risk of high interest rate. Weigh your options correctly and go for a balance transfer card with the best options to you, so that you can save a lot of money.
2. The time period and the interest rate – These are two factors that matters the most when you transfer the balance. So find out how long is the introductory period and the rise in interest rate after the introductory period is over, before applying for a balance transfer.
3. Find out how much money you save on the credit card – You can use a balance transfer calculator to find out how much money you can save through shifting the balance to the new card. Also, you can use the credit score estimator to find out by what points, the credit score can rise, if you pay your outstanding balance quickly,.
4. Do balance transfer only from a high interest card – Picture this, you have a credit card that has an interest rate of 7. 5 APR and you do a balance transfer. There are fees for the balance transfer to the extent of 4 percent and there is an annual fee also. If this is the case, you are not really saving money. In other words, just do balance transfers on the cards that carry high interest rates.
5. Keep your old credit card account open – Do not close the account of the card you shifted your balance from. Also do not close the oldest card that you use. Keeping your old account open and active can be of help to your credit rating and also shows to the lender that you have good amount of available credit limit.
6. Stop using old cards once you transferred the balance – This is not a contradiction to the above point. We should not close the accounts, only stop using the cards. Also, if you are tempted to spend, you can cut the card. Do not use the balance transfer card for credit purchases, you can use one of your oldest ones for that or get a low interest card for new purchases.
7. Prioritize paying your outstanding balance – The best way to get out of debt and to increase your credit score is to pay off the outstanding balance before the introductory period.
8. Do not make purchases on the balance transfer credit – Purchases have a higher interest rate compared to balance transfer. A balance transfer card should be used only for paying down the shifted balance and not for new purchases, which may have a higher interest rate, which can only increase your debt burden.
9. Do not default on your payment on the balance transfer credit card – This is a very important point; you must find out how high will be the increase in APR if you fail to make payments. In a general scenario, two more late payments can make the credit card company cancel your promotional offer of low interest rate and put you on a high interest one right away.
10. Find out if there are any payments pending on the old credit card – Find out if you have to pay an interest for the previous month, before you may be levied interest before the balance transfer took place.