Many people are getting out of debt faster using balance transfer credit cards. Since most credit cards carry high interest rates, and many new cards are offering 0% on balance transfers for up to a year, you could stand to save a bundle by transferring a balance.
To get the most out of your balance transfer, we have a few tips for you:
- Search online for the best balance transfer credit card offers. Several companies are still offering 0% introductory deals on balance transfers. To maximize your savings, look for the lowest teaser rate you can find.
- Do the math so you’ll know how much you can save. Don’t forget that most balance transfer credit cards charge a fee for the balance transfer. Usually, this will be around 3% – 5%. Make sure you factor in the fee when calculating how much you will save.
- Be prepared to pay off the entire balance transferred during the introductory period. Some cards will charge interest retroactively on the entire balance transfer if it isn’t paid off in time, but even without penalties it’s a good idea to pay it off. This will ensure you are maximizing the advantages of balance transfer credit cards.
- Keep your old accounts open after the balance transfer. Unless your old credit card has an annual fee or inactivity fees, it costs you nothing to maintain the account. We do recommend you don’t use the card, though. Cut it up if you have to, but don’t charge up any new debt. Good availability to plenty of revolving credit will improve your credit rating, so don’t close the old account if you don’t have to.
- Don’t use the balance transfer credit card for purchases. Many cards have a different interest rate for purchases, and they’ll often apply your payments to the purchases first. This means you’re not paying off your balance transfer if you’re also making purchases. Discipline yourself not to rack up any new debt while you’re paying off your cards.
Once you’ve selected a balance transfer credit card, be sure to keep up on your payments. Most credit cards have a penalty APR that kicks in when the customer goes over the credit limit or makes a late payment. If you end up paying penalty APRs and fees, you stand to lose all the money you saved on your balance transfer credit card.
