Consumers are increasingly digging themselves out of debt. One smart way to do it is by taking advantage of low introductory interest rates on new credit cards and transferring balances from high interest rate cards. We’ll share our top ten tips for getting the most out of your balance transfer credit cards:
- Always search for the best offers from multiple lenders on balance transfer credit cards. Some are offering 18 months at 0% APR, others just six or seven. Be sure you’re finding the best deals and compare terms.
- Don’t transfer a balance on the credit card application if you can avoid it. You may not know your introductory rate or time period until your card arrives, and you can’t be sure you’ll save any money without that information.
- Do the math to make sure you’re getting a good deal. Use a balance transfer calculator to see how much you can save on balance transfer credit cards.
- Transfer balances only from cards with high interest rates. You may think you’re saving money transferring a balance from a card with a 7.9% APR, but you’re probably not. The balance transfer will cost you a fee of up to 5%. If there are any annual or account set-up fees on the new card, you could be eating up your savings with fees.
- After you’ve transferred the balance, stop using your old cards. They’re only adding to your debt load, which is what you’re trying to get rid of. If you can’t stop yourself from spending, cut up your cards.
- Keep your old credit card accounts open. No, we’re not contradicting what we said above about cutting up your cards. Keeping the accounts open and active could help your credit rating, because it boosts your amount of available credit. Don’t use the cards, but don’t close the accounts either.
- Pay your bill on time every time. Make sure you know how high the penalty APR is on your balance transfer credit card, and what puts it into effect. If you make one or two late payments, you could end up in worse shape than you started out.
- Keep making payments on your old credit card until the balance transfer goes through. Even after that, be sure to check and see if you owe any interest for the last month, because you could have been charged interest before the balance transfer posted.
- Pay off your balance transfer during the introductory period. Not only is this the best way to get out of debt faster, but you could be responsible for retroactive interest if you don’t.
- Don’t make purchases on your balance transfer credit card. Purchases often have a higher interest rate than balance transfers. If your lender applies negative payment hierarchy, you could end up with a whopping bill for the interest on any purchases you make until your balance transfer is paid off.
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