Balance transfer credit cards are all about saving money, transferring your credit card debt from one credit card to a lower interest credit card. It sounds simple on the surface yet there are some things that you really should know about balance transfer credit cards in order to make the most of them and save the most amount of money as possible.
Many banks have balance transfer credit card offers, some ranging from 0% p.a. interest rate to higher rates such as 5.9% p.a. It is often easy to be lured into the 0% interest rate offers as the idea of paying absolutely no interest appeals to everyone! And so it should. However, to most get the most from your balance transfer credit card you really need to do a credit card comparison to see which card will suit you best.
For example, 0% p.a. interest for 3 months is a great offer yet a potentially very bad one at the same time. If your credit card debt is $1,500 and you can pay off $200 per month then after three months of using this card you have paid off $600, with no interest. Great! But unfortunately you are still left with $900 debt and this debt you will be charged at the interest rate the credit card reverts to – and this is usually much higher ie. 15% p.a. and therefore you will need to pay much more money and in some cases even a higher interest rate than the card you had previously.
One of the best ways to compare balance transfer credit cards is to look at how much debt you have on your card and how long it will take (realistically) to pay of this debt. If it will take 12 months at least, then you should look at balance transfer offers for 12 months. Typically 12 month balance transfer offers are not going to be 0% and more likely a higher rate such as 1% to 5%. Although everyone would prefer 0% p.a. there is a catch as explained above so it’s much better to choose the lowest balance transfer rate for the period it will take you to pay off the card.
An important thing to remember is that you can always find a new card after the balance transfer period, however the ultimate objective is to get rid of the debt and finding the right balance transfer period will go a long way to helping with that.
It’s also recommended that you only use the balance transfer card for the purpose of paying off your debt, unless it has a very low purchase rate. And definitely try and avoid cash advances as these have the highest interest rate of all.