Balance transfer credit cards can be a great way to get out of debt. They allow you to consolidate your debt into one manageable payment at a 0% interest rate - instead of dealing with multiple high-interest payments from different creditors.
But as with anything related to personal finance, there are certain pitfalls you should be aware of to make sure you're getting the most out of your balance transfer credit card. Let's take a look at some tips for using balance transfer cards wisely and effectively.
A balance transfer credit card is a type of credit card that allows you to move existing debt from other accounts onto the card at a 0% balance transfer interest rate for a set period of time. This can be incredibly helpful if you are struggling with high-interest payments on other accounts, as it allows you to consolidate all that debt into one low-interest payment.
You can pay off your credit card debt at a much faster rate and make strides to improve your credit score.
It's always important to make sure you understand the terms and conditions of balance transfers before signing an agreement with your credit card provider.
Make sure you understand all the balance transfer fees associated with the card, such as annual or processing fees. How long does the 0% interest period last? Is there a balance transfer fee for switching a balance to another card? These factors need to be carefully researched and considered carefully before you sign an agreement.
When using a balance transfer credit card, it's important to make sure that you are making at least the minimum payment each month in order to avoid late fees or penalties.
If possible, try to pay more than just the minimum payment each month to pay off your credit card balance faster and save money on interest charges in the long run.
Once you have transferred your debt onto your new balance transfer credit card, try not to use it for any additional purchases or cash advances. When you start paying off the balance transfer card, it can be tempting to dip into your credit limit again.
Doing so will negate many (if not all) of the benefits that come with having this type of card and could result in higher interest rates or other fees being applied.
Finally, ensure that you keep track of when your 0% interest rate period ends on your balance transfer credit card so that you can pay off your remaining balance before then.
If there is still an outstanding balance when this period ends, you will need to pay interest charges again - potentially leading to further financial difficulty down the line.
Using a balance transfer credit card can be an effective way to take control of your finances by consolidating existing debt into one manageable payment at 0% interest - but only if done properly.
By following these tips on how best to use this type of account, you'll be able to get out from under high-interest payments and start making progress towards becoming debt free.
For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.