Balance Transfers - Buyer Beware
Today there are many credit card companies out there competing for your service, because of this, they all are finding unique incentives and appealing rewards to get you to apply and use their credit cards. Many of these are centered on Balance Transfers. However, if you use these incentives to try to prosper you may find yourself in more debt.
Many credit card companies today are offering 0% balance transfers. This has helped many people that are overcome with debt. It works very simply. If you have a standing balance on one of your credit cards that charges high interest rates you can transfer that balance to a credit card that offers 0% on balance transfers. The new card will give you 0% interest for a set period of time on the balance transfer. Normally, this time period is for 3 months, 6 months, 9 months, 12 months and sometimes as long as 15 months.
With 0% balance transfers credit card offers, you will be able to save hundreds of dollars in interest charges. However, you should be aware even with this great opportunity there are pitfalls. When you are reading the fine print of credit card company, be sure that you are really applying for a credit card that offers 0% on balance transfers instead of 0% on just purchases. If you get these confused, you could be in a lot of trouble when you transfer your balance from another card.
In addition, even if you do secure a 0% balance transfers offer you may not receive 0% on any of your purchases. This would mean that anything you purchase with the card would have the normal interest rate.
As an example, if you $6,000 on credit card at 15%. You decide to do a balance transfer with a credit card that allows 0% on balance transfers for 6 months. You will save quite a bit of money in interest by transferring the money to a 0% balance transfer credit card. Without thinking about the consequences, you make a card purchase and then dutifully pay back the $100. But the $100 will be applied to the $6,000 balance transfer instead of your new purchase. You will then have $5,900 left on your original card balance with 0% interest and $100 at the 15%.
However, if you pay close attention to the fine print you can find a credit card company that offers 0% on balance transfers and 0% on all purchases for a certain amount of time. Just remember, that if you do not pay off the debt prior to the end of introductory special you will then be paying interest on the money once again. The idea is to use 0% balance transfers and pay off the entire debt prior to the end of your 0% interest rate. You can even use another card that has a low APR for smaller purchases and only use the 0% balance transfers for larger card balance transfers.
Be Smart and Repay Your Credit Cards Quickly
There are few things in life that can cause as much long term strain and pressure as financial worries. Especially if you have children or a family to support, you will be very aware that failing to keep on top of finances is not an option. Therefore, there are certain steps that you may wish to take to make this job that little bit easier and have fewer things on your mind to stress or worry about. One of these pieces of advice will usually be the repaying of your credit cards.
Credit cards are extremely useful and convenient finance facilities, but as we all know, they can charge very high interest rates and in this sense are a very expensive tool to be using, particularly if you are not paying back your full outstanding balance each month. Therefore, it is advisable that if at all possible, you try to repay your credit cards and keep a zero balance on them. This is however easier said than done. For most people, earning the money to repay the card is not really the problem, it is more that they simply keep using the card and spending the money, even though they have realised that they can no longer afford to be maintaining the outstanding balance.
If you do want to clear your credit cards, one of the first things you should do is set up a direct debit or standing order to pay off a certain amount each month. This way you will always pay your bill on time and will not be subject to administrative penalties or fees for late payment. The amount you set for repayment level should be significantly higher than the minimum required repayment. This is because keeping the payment at the minimum will not pay off the credit card balance very quickly at all. In fact, it may just a servicing level that will pay the interest but make no progress at all towards the outstanding balance.
Once you have set a monthly repayment amount and are satisfied that it is high enough to repay the credit card balance in a reasonable time frame, what you should next need to do is stay strong and discipline your spending. This means refraining from using the card, and perhaps waiting until next month when you have cash to buy something you need or want. It is this discipline that will be the difference between clearing the debt and carrying it into the future. If you find it too difficult, consider leaving the card in a safe place at home or even cutting it.
Remember do not just keep to a minimum payment, this is a sure fire way to get further into debt. By paying an extra Ј10 each month your total credit card interest will drop substantially. Credit Card Companies set their minimum payment requirements too low, many at just 2%, and too many consumers fall into the trap of thinking minimum payments are adequate.
By taking heed of our advice you will soon find yourself clear of credit card debt.