While doing a balance transfer it is essential that you understand how this thing works. Firstly, the balance transfers will look interesting only if they carry 0% interest. This is because of the fact that you can save huge amounts of money by way of interest charges on the revolving balances. These interest-free balances typically last for around 6 to 12 months. Basically, the card company is lending you the money for free.
Most American households typically carry the debts on their credit cards for over a year. These are usually balances of over $10,000 or more. Families in the US pay over $10,000 by way of interest on their credit cards each year. Because of this the balance transfer offers look very enticing and consumers overlook the fine print before signing up.
These balance transfer offers are generally given to those with good credit. So, you must think before you apply. If you struggle to pay off before the deadline, you must watch out or you will end up with a huge interest even before switching to another card. If you are a compulsive spender, then you are likely to overspend as you will have free money for a certain period of time. So, the ideal candidate for a balance transfer would be someone who is serious about getting rid of the debt within the end of the grace period. There are few tips that you need to follow:
- You must ensure that you pay off your balances before the end of the grace period or switch to another card before the end of grace period. Don’t remain with the same card if you feel that you will not be able to pay up the balances on the card before the end of the grace period.
- If you have been offered a teaser rate, there is no guarantee that it will remain so. Hence, you must ensure that 0% offer will stay at 0% when the card arrives through the mail.
- You must ensure that you have 0% on purchases as well as balance transfers.
- Look at all the features in the card and don’t look only at the teaser rate and choose the card. Shop for a credit card with no annual fee and look at cards that have cash-back options as well as fraud liability coverage.
- Ensure that there is no fee on the balance transfer and they must be free as mentioned in the card.
- Always ensure that you don’t default on a single payment. Otherwise, the teaser rate will turn meaningless. You will also end up with a nasty penalty fee. To ensure that you don’t default on payments you could set up the automatic bill payment. Always pay a bit more than the minimum monthly payment that is required. This is one way of bringing down balances.
- Remain organized and ensure that you keep track of the balances that need to be paid.
- Don’t keep hopping around from one card to another as companies will keep a watchful eye on such things.