Learn to identify the main considerations that can make or break a balance transfer card. Understand how to focus on what matters when making your choice.
The best balance transfer card will have your name written all over it – but not until you receive it. You cannot spot the best balance transfer cards by simply looking at pictures of credit cards, and it is also not a simple matter of choosing the lowest percentage rate. You have to do a little maths and history first.
Consider doing the maths when analysing balance transfer cards
The maths is important because you will need to work out whether the offer period allows you sufficient time to clear your debt
in full. The history is crucial because you might only be able to do your sums correctly if you take into account how you have behaved with debt in the past.
If you are notoriously lax in handling your finances, then you should choose a longer offer period on your balance transfer card, if not a life-of-the-balance credit card, meaning the interest rate on your balance transfer is set until you pay it off, no matter how long that takes. A 0% rate for six months may look very attractive, but it’s not going to work for you if you end up with a chunk of debt remaining after the six months that is then hit by a punitive rate of interest again.
Although the annual fee should be looked at, it should not be the deciding factor. $10 here or there on the annual fee is not a deal-breaker when hundreds or even thousands of dollars on a balance transfer are at stake.
Important balance transfer credit card tips
The key to choosing the right balance transfer card is budgeting your finances as best you can. You must be able to spot where your repayments are coming from, and where you can make savings you perhaps have never made before. This takes the guesswork out of picking a balance transfer card.
You must also not bother looking for a fantastic rewards program, because this may mean you are tempted to spend on your card. This is a BIG no-no. Making purchases on a balance transfer card before your transfer has been paid off in full will cause your purchases to be sent to the back of the payments queue like naughty children.
Your repayments always go towards paying off your cheapest debt first. A balance transfer at 0% will need to be cleared in full before any purchases at 15% or cash advances at 20% are reduced by a single cent. That can cause a very expensive tail-end to your payments queue, and it will ruin the point of your choosing a balance transfer card in the first place.
Remember:
Balance transfer cards are only useful if you reserve them for that initial balance transfer. Once that is cleared, how you use them is up to you.
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Posted on Friday, March 26th, 2010 at 4:18 pm
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