What mistakes should you avoid when transferring your balance from one credit card to another?

What mistakes should you avoid when transferring your balance from one credit card to another?


We all enjoy the freedom our credit cards give us, but when the freedom comes with a high interest rate we need to look at our options. If paying off the whole balance isn’t something you can do at the moment, then you will want to look at transferring your balance to a credit card that offers 0% interest on transferred balances. Sounds like a great idea, you have a high interest rate with a high balance, and you receive a card offering 0% interest rate on transferred balances, what could go wrong?

There are a few mistakes that you could make when transferring your balances. So doing your homework is very important. Now that almost every credit card company has a website, you can investigate most of the details of the card’s transferring policy. Look in the fine print for the following items:

• Avoid balance transfer fees. These fees can be identified as a percent of your transferred balance or a specific dollar amount. Fees are generally limited to $50-75.00; while that doesn’t sound like much, you were transferring your balance to avoid interest and fees.
• What is the expiration date for the 0% interest? Six to 12 months is generally the length for 0% balance transfers. Track the balance transfer duration on your own as the duration typically begins the moment the balance shows up, not the billing cycle. If you lost track or never tracked it to begin with, call the company and find out the date that the balance will begin to accrue interest charges.
• Watch carefully that you do not make a cash advance instead of balance transfers. Often times you will receive checks from the card company to use for cash advances or paying other bills with a check when the card can’t be used. These are not balance transfers and will be charged interest. Only using the card for 0% balance transfers will result in no interest charges.
• Always make a payment. If you miss a payment, you will begin accruing other charges; late fees and over the limit fees are two fo the most common, if not making a payment and the late fees bring the balance over the limit.
• The 0% interest does not extend to purchases on that card. Make certain you know the interest rate on balances other than transferred balances. Often times the 0% interest is made up on purchases on the card. Money has to be made for the company somehow.
• Payment is applied to the lower interest first on the balance. If you have made a purchase or cash advance on this card in addition to the balance transfer; your payment will pay off the balance transfer portion first. This enables the company to make money on the portion of the balance that charges interest.

Have a plan on how you will be paying the transferred balance before it begins to be charged interest. Put extra money in your savings account to earn interest while you make interest free payments on the transferred balance. You will be making money instead of spending extra money on this transferred balance. Make certain you pay the remaining balance off before the last billing cycle of 0% interest. You do not want to be charged interest because you missed the cut off by one or two days. Ensure you have plenty of time.

Cards that offer 0% interest on balance transfers can be a great way to save money or ease you through a lean cash period if you are informed and savvy. Do your research, track your time carefully and plan the balance pay off correctly and you will come out financially ahead.