How to Make a Balance Transfer Credit Card Work for You
How to Make a Balance Transfer Credit Card Work for You
When used right, balance transfer credit cards can reduce the cost of your credit card debt and help you pay off balances sooner. For most people, using BT cards is a wise move in debt management. Of course, it is if it works for you. So, how can you make the most out of it? How can you keep buying the things you love but at a much lower cost?
The aim of getting a BT card is to take advantage of the limited zero-interest offer to manage your credit card debt. With extravagant use of the card, however, it’s pretty possible to get further into debt. Luckily, with the right information, it’s easy to get the right card and use it providently until you repay the balance.
A lot could be learned from the Australian market that uses a creative comparison engine (visit this site to see a live example) to compare cards’ features and fees side-by-side.
Here is what you should know.
Get a 0-Percent Rate
When searching for a balance transfer card, focus on finding a 0-percent rate. It’s possible to find a card that offers a 0% rate for about six to 26 months. Take into the period you need to pay the balance in full before the promotional period ends.
Some banks can offer a 0% rate if you transfer the debt to one of their cards. A zero rate means you won’t pay any interest during the promotional period, and this means no costs for you. However, you might have to pay annual fees and balance transfer fees.
Even after getting a zero rate card, take the time to compare the fees of each card before picking one.
Cancel Your Old Credit Card
Once the lender has approved your card application and transferred the balance, be sure to close your old credit card account.
After the transfer, the card remains open until you close it yourself. Failure to close it means you’ll continue paying annual fees when you’re no longer using it.
It can also be tempting to use the card again, knowing that it has a zero balance and your credit limit is still available. Using it could only mean more debts for you. So if you’re serious about getting out of your credit card debt, closing the card account should be the first thing to do after the transfer.
Come up With a Repayment Plan
Getting a balance transfer credit card is only helpful when you use it to gain control of your credit card debt. Just because you’ve got a 0-percent rate for say, 15 months, doesn’t mean you should get comfortable.
Instead, come up with a repayment plan once you get approved. The plan should help you clear the balance within the promotional period. You can use free online repayment calculators to determine your monthly payments, thus making budgeting easier.
Commit to your plan as much as your budget allows. You can also pay more than your minimum monthly payments to complete the balance quickly. To ensure you never miss a monthly payment, it’s advisable to set up automatic repayments from your bank account.
Your primary focus should be to clear the transferred balance before the introductory period ends.
Avoid Spending on the New Card
While you’re still paying the transferred balance, you should avoid using the card for any purchases. Your only focus should be to pay off the transferred balance.
Well, you’re not restricted from using the card for purchases. But spending on it could only delay your balance repayments. When you use it for shopping, any repayments you make are used to pay the amount you used for purchases.
Also, purchases come with interest, so it will be more debts for you. Many balance transfer cards don’t offer interest-free periods when you have an outstanding transferred balance.
You should only use the card for purchases when you’re confident about paying the balance before the introductory period ends. Otherwise, you’ll be just be piling up your debt, rendering your repayment plan worthless.
Final Thoughts
Getting the right balance transfer card matters. When shopping around for one, look at the length and rate of the introductory period. Be sure to inquire about the interest rate of the card when you fail to pay the full balance before the period ends.
Also, take note of the interest rate you will pay on purchases. Most importantly, look at the features a card offers. You may want more features if you’re able to pay the balance quickly. If not, it’s wise to choose a card with fewer features to allow you to focus on clearing the balance.
A balance transfer card can help you control your credit card debt when you use it in the right way. You should ensure you’re always making the minimum monthly repayments and avoid using it for regular purchases, if possible.
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