Wed, 5th May, 2010 - Posted by Nash

Best Balance Transfer Card Practices

best balance transfer practices

While it can be tempting when you receive a new credit card in the post to take for a quick spin at the mall when the new balance transfer credit card arrives it is best to lock it up and throw away the key

Taking control of your credit card debt is about more than just finding a balance transfer credit card offer. You also need to know how to make the most out of your balance transfer credit card and how to avoid getting into the same situation with your new card. Therefore following are several important practices you should follow with the new balance transfer credit card to get the best out of your offer.

1. Don’t spend on your balance transfer credit card

While it can be tempting when you receive a new credit card in the post to take for a quick spin at the mall when the new balance transfer credit card arrives it is best to lock it up and throw away the key. A balance transfer credit cards sole purpose is to help you control your credit card debt therefore spending on your balance transfer credit card is not only reiterating a bad habit it is also getting you into a worse debt. Most credit cards will have what is known as a payment hierarchy, this is where the oldest balances will be repaid first. This means that if you spend on a balance transfer credit card your monthly repayments will continue to go towards your transfer balance while your new purchases will start to accrue the standard purchase interest-rate. This is negates all the effort you have put into finding the best balance transfer credit card because the interest on your new purchases will need to be paid.

2. Don’t use your balance transfer credit card for cash advances

While a cash advance is a bad idea on any credit card because the interest rate on a cash advance is usually around 5% higher than the standard purchase interest-rate it is an especially bad idea on a balance transfer credit card. Just as you should make purchases on your balance transfer credit card you certainly shouldn’t make cash advances because your high cash advance interest-rate will be charged until you have repaid your transferred balance so rather than your balance transfer credit card helping you control your credit card debt it has actually become one of the most expensive cards in your wallet.

3. Make the transfer as soon as possible

When you apply for a balance transfer credit card you will often be asked in the application to enter the credit card number and balance you are transferring. If your credit card application does not ask you for your balance transfer details make sure you contact the provider as soon as possible after your account is activated to make the transfer. Some balance transfer credit card offers will begin from the time you are new credit card is activated rather than from the time you transfer your balance. Therefore if you think you are applying for a six-month balance transfer but it takes you a month to get around to transferring your balance to your new card then in some cases you may only have five months of the low or 0% interest rate of your balance transfer offer. The longer you delayed transferring your balance also means more opportunities to be tempted to spend on your new credit card.

4. You will still need to make regular repayments

A balance transfer credit card is just like any other credit card and just because you’re not spending on it doesn’t mean you don’t have to make regular repayments. Always make sure you pay at least the minimum amount each month on your balance transfer credit card because in some cases missing a monthly payment can mean your balance transfer interest-rate becomes void and your transferred balance will and then attract the standard purchase rate of the credit card.

5. Remain aware of the end of the offer

Once the pressure of a higher interest-rate credit card is gone it can be easy to relax into your new routine paying just the minimum required on your balance transfer credit card. However if you only pay the minimum amount you are unlikely to repay your balance in full before the end of the transfer offer — this is how the credit card companies make their money. Instead always remain aware of when your balance transfer offer expires and whether your monthly repayments will pay your balance down to zero in time. If it looks like you’re not going to make it start shopping around for a new balance transfer offer to give you more time.

6. Watch out for the conditions

Before you apply for a balance transfer credit card make sure you read the fine print of the contract. It can be easy to blindly check the box that says I accept without really understanding what you’re signing up for. In some cases a balance transfer offer will require you to make a purchase on your card before the balance transfer interest-rate is activated if you don’t your transferred balance will continue to earn a higher purchase interest-rate; however in this case the purchase you make to activate the balance transfer offer is also earning a purchase interest-rate so this may not be the best type of balance transfer credit card for you. Other balance transfer credit card providers will use their purchase interest-rate as the revert rate at the end of the balance transfer offer while others will revert your balance to be charged a higher cash advance rate so it pays to check what will happen if you don’t repay your balance in full.

7. Don’t spend for the rewards

Using your credit card to gain rewards points could be what got you into trouble in the first place so it is important to remember not to fall into the same trap of being tempted by your balance transfer credit card offering you the chance to take part in an enticing rewards program. As you know by now the bank doesn’t actually want you to repay your balance within the balance transfer period so they may regularly try and tempt you with a promotional deal on purchases or bonus rewards points for shopping with a particular partner and retailer — don’t fall for it.

8. Choose the right balance transfer offer

There are a number of different types of balance transfer offers and an endless number of providers who want you to sign up for their balance transfer credit card. That’s why it’s important to make sure you choose the balance transfer credit card which is right for you and your balance. Choosing a balance transfer credit card with an offer which expires before you will be able to repay your balance for example can see you in even worse credit card debt if the balance transfer offer you have chosen reverts your balance to the cash advance interest-rate.

9 Compare fee free balance transfer credit cards

If you’re looking to apply for a balance transfer credit card to control your finances you don’t want to have to worry about credit card fees. While you won’t be using your credit card and attracting transaction fees many credit cards have an annual fee which can be several hundred dollars. A credit card and you will be is also applied to your account as a purchase which needs to be repaid so you may find yourself paying interest on a credit card fee when you thought you were doing the right thing in choosing a balance transfer credit card offer.

Conclusion

The balance transfer credit card is a great way to control credit card debt which has gone out of hand after the peak spending periods of Christmas and New Year’s example or when you simply get sick of making numerous credit card payments each month and want to be debt free living within your means not owing anyone anything. Therefore find out more about the best balance transfer offer is available, now that you know how to make the most out of a balance transfer credit card.

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Categories : Balance Transfer, Credit Card, Debt Management

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