Important points about balance transfer cards
A lot of people are confused of what exactly a balance transfer card is. They might see an add on TV advertising this really cool deal with little to no interest rates and think it is the right solution to clear their current card debt. Little do they know that balance transfer cards can be a tricky tool if handled wrong. To help you understand these type of cards in more detail I have compiled this article.
Tips to compare balance transfer cards
Before you pull up all the relevant card information from lenders you need to be clear on your objectives. Why do you want a balance transfer card? Is it to:
- Clear up debt
- Enjoy lower (or no) interest rates
- Have an additional card to go shopping with?
If your answer was the last one, then you are seriously in need of a financial reality check. Picking credit cards up like new pairs of underwear is inviting the inevitable. Credit cards are not tools you can use to load up until they burst. A credit card should be handled with respect and savviness.
Since most lenders basically fall over themselves to offer you the “best deal” of the century it’s up to you to stay informed, and most of all, level-headed.
Transfer Fees
Some card lenders will charge you a transfer fee when you apply for one of these cards. The transfer fee is applied when you get accepted and your existing credit card debt balance is transferred to the new balance transfer card by your new lender. You want to make sure that you re aware of the actual percentage of this cost before you sign on the dotted line.
Annual fee
Some balance transfer cards come with a $0 annual fee, while others incur a much higher cost. Ultimately you can’t compare balance transfer credit cards on this part alone. It’s possible to end up paying less overall with a yearly fee and low, or no interest.
Features
What do you want vs what do you need financially to get out of debt. Many consumers are guided by their incessant need to shop ’till they drop, regardless of the financial consequences. Large credit card competition makes you the consumer the actual winner, but only if you carefully select your card.
Features are a big draw card for many card shoppers because they seem to come as some sort of added freebie. Please take a good look at the offered features; they are only as good as your use for them and could end up costing you money.
Interest
The interest rate of your new balance transfer card is one of the most important parts to compare. If you are drawn towards a 0% card, then please check the small print. If you fail to pay off your entire debt within the promotional period (usually 6 months), you actually end up with way more debt than when you first started.
Purchase rate
How much is the purchase rate? Balance transfer interest rates usually apply to the actual transfer you make. Say you owe $5,000 on your old card, now you are looking to transfer this debt to a 0% balance transfer card. Be mindful that the 0% will ONLY apply to your transferred debt (the $5,000), and NOT to any new purchases you make.
A lot of consumers get caught out with this aspect of transferring debt and end up owing much more months down the track because they fail to understand the implications this has on their debt.
Pick once, enjoy less debt
By picking the right balance transfer card for your financial situation you will be able to enjoy more financial freedom once you’ve paid off your debt in full. The whole purpose of applying for such a card is to get rid of debt, so unless you are serious about doing just that, don’t bother.
With a bit of re-organising your budget, and some help from a financial counsellor you should be able to get hold of your financial situation a few months down the road. Remember, watching your money like a hawk for the next year is easier than trying to fight a mounting debt for the rest of your life.
Important points about balance transfer cards
A lot of people are confused of what exactly a balance transfer card is. They might see an add on TV advertising this really cool deal with little to no interest rates and think it is the right solution to clear their current card debt. Little do they know that balance transfer cards can be a tricky tool if handled wrong. To help you understand these type of cards in more detail I have compiled this article.
Tips to compare balance transfer cards
Before you pull up all the relevant card information from lenders you need to be clear on your objectives. Why do you want a balance transfer card? Is it to:
