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Owing money to credit cards can turn your life upside down. Interest accrued on money owed becomes so high that you begin to struggle to make payments and balance your book. Many consultants and friends will strongly recommend trying out balance transfer as a way out of the financial tangle. While the option may bail you out temporarily in the long run you may just be increasing your debt.
Here are simple rules to follow when considering transfer of balance owed on
credit cards:
1. Determine how long the 0% or low interest rates are valid. Often credit card
companies make low or no interest offers to lure clients but the offer has a time
limitation after which the interest rate will rise again. Try and find a credit card
company that is making a low interest offer for a longer period of time. And
only transfer that amount of balance that you are certain of paying back within the period.
2. Read the offer carefully. Most credit card companies charge a transaction fee for
credit card balance transfers. Many card companies print important terms and conditions
in small fonts. Read the document carefully.
3. When you make a balance transfer ensure that the new company sends a notification to
you and the old card company. Verify that the old card company receives all the
required paper work and that it acknowledges transfer of balance. Most important is
that you must retain both the old and new card for at least a year if
you do not wish to damage your credit history.
4. Weigh carefully the pros and cons of 0% for a limited period against a low interest
offer over a longer period of time. Sometimes it is advantageous to transfer balance to
a low interest credit card instead of a limited offer of 0%. When you calculate things
like transaction fees, rising interest and so on you may find there are more advantages
to transferring credit card balance to long term low interest card over a short
term 0% interest card.
5. Many credit cards that invite transfer of credit card balances charge high rates for
use of the card. So, when you use the card to make purchases and so on you will land up
paying higher interest rates over what you were paying with your old credit card. It is
important for you to understand clearly the functioning of credit cards that invite
transfer of credit card balances.
While contemplating a credit card balance transfer think about:
• How much you will save on the whole not just the lowered interest rate.
• Determine how much unpaid balance should be transferred. You need to check whether
the 0% or low interest card has in place limits.
• Budget how you are gong to pay your debts. Prioritizing and finance planning is crucial.
• Find out what the fees payable for transfer of funds some credit card companies will
charge at least 3% of the amount transferred.
• Find out if an annual card fee will be charged.
• Placing limitations on use of credit cards. Put away the cards and do not give into
temptation until you are free of debt.
Debt can be dangerous and the first step to take is to get out of debt by careful
knowledgeable planning.
About the Author : Aaron Brooks is a freelance writer for
Free Credit Card, the premier website to
find information on Credit Card including topics on credit card market, credit cards,
business card credit comparison, card credit processing, credit card reviews, credit
card offers, card credit deals and more.
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