To help reduce credit card balances, many people turn to balance transfer credit cards.
While these cards can help you reduce your debt, they do catch people out from time to time.
In this article, we’ll flag some common pitfalls and discuss the right way to use these cards.
The pitfalls
First things first: let’s discuss some of the ways that you can ensure a balance transfer credit card doesn’t cost you money. They are a product, after all.
1. Try not use the card until you’ve paid it off
It’s important to note this isn’t your new personal spending account! In fact, try not to use it at all. That’s because the card promotion most likely only relates to the balance transfer and any new purchases will come attached with a high-interest rate.
2. Don’t set and forget
Many balance transfer credit cards have a promotional period. But once that’s up high-interest rates can kick in. So make sure you don’t think the job is done once you’ve transferred the balance, be proactive in paying it off!
3. Read (and understand!) the Terms and Conditions
It’s important to double check a number of details in the fine print, including the interest rate after the promotion, hidden fees and charges, and when the balance transfer start date officially begins so you can pinpoint the exact promotion end date.
Using balance transfer credit cards to your advantage
Now that you know what to look out for, it’s time to discuss some measures you can put in place to ensure you make the most of these cards in three easy steps.
1. Do your homework
There are plenty of options out there. The important thing is to pick a card that’s right for your situation. If it’s going to take you a while to pay off the card, pick one with a low interest rate. If you think you can get it done quite quickly, pick one with a generous interest-free promotional period, which will normally be between 6 and 18 months.
2. Cancel your old credit card
As soon as the balance has been transferred cancel your old card so that the temptation to spend on it is gone for good!
3. Create a clear financial plan to pay it off
Work out how long you have to pay the debt off, and then
make sure you break it down into manageable payments each pay cycle. After you
pay your rent and household bills for the month, you may decide that your
credit card bill is the next expense you pay.
If you need help better managing your finances, get in touch