This article will talk about both the pros and cons of using credit cards with balance transfers.
Credit cards can be a great way to do things that would take you years to save up for, or they can help you out in an emergency. But there's another side to this chance that could turn into a real nightmare. You might already know what a nightmare it can be to have too much credit card debt. You might think that credit cards that let you transfer your balance are an easy way out. This article will help you avoid potential problems and give you the information you need to find the best balance transfer credit cards for you.
Danger One - Interest rates
If you don't watch out for the following problems, interest rates can turn into a game of musical chairs (different rates). First, please answer the following: Does your credit card's interest rate change after a certain amount of time, or does it stay the same? Is it the same when you buy something new? Most importantly, you need to know if the interest rate on the balance transfer loan will stay the same. If it will go up to high rates in three months, you may be better off keeping your current loan.
Opportunity One: Some interest rates stay the same for the life of the loan, and you can combine loans with higher rates to pay off your balances faster and pay much less in interest than if you just kept one or more loans with high rates. You need to look into the terms of the balance transfer credit cards to make sure that the low interest rates will stay the same.
Danger Two: I forgot to pay on time! Depending on how your contract is written, this could be a disaster for your long-term budget.
Chance Two: Know what parts of your contract make the interest rates go through the roof. When you know the terms of your contract, you can control whether or not you have to pay late fees, penalties, or very high interest rates on your balance transfer credit card in the future.
Third risk: watch out for those hidden fees! There are credit cards that will charge you more fees than they will lend you. Be careful, because you don't want to pay fees but still be able to pay off your loan quickly. Balance transfer fees, annual fees, loan fees, late fees, over-the-limit fees, and other fees can make the cost of your loan go through the roof.
Chance No. 3: Read the fine print!
Do some research on the different cards you can get to make sure there are no hidden fees. Some balance transfer credit cards don't charge a fee and don't charge interest for the life of the loan. You don't want to get a balance transfer credit card with high interest rates and up to a 4% fee on the amount of the loan you are transferring. It's easy to see why finding the best balance transfer credit card can save you hundreds of dollars with just a few minutes of research.
Danger No. 4: You pay off one loan or credit card, only to use it again. In the end, you will get deeper and deeper into debt.
Option Four: Use your transfer to pay off that account, then CLOSE THE ACCOUNT and CUT UP THAT CARD. Don't even have the account or credit card(s) around to tempt you to use them. You can manage your credit, so don't let it decide what you can do with your life in the future.
Danger No. 5: Be careful when you move your old loan(s) to your new balance transfer credit cards. You need to make sure you give your new balance transfer credit card company the right account number(s) for the balance transfer payment. Also, keep making the minimum payments until you get a statement in the mail with a $0 balance or confirm over the phone (make sure to write down the name, date, and amount paid as proof) that you have paid off your debt in full.
Chance 5: These extra precautions and follow-up work will keep you from having to pay late or penalty fees on your old accounts. Again, you're taking charge of your credit and making sure that your financial future looks good.
Conclusion
Yes, balance transfer credit cards can be a real way to help you get out of debt by combining your credit cards and loans and maybe even lowering the total amount you have to pay back. But don't forget that this type of credit card comes with risks. Check the interest rate terms, any triggers that could cause your interest to go up or late fees and penalties, and any hidden fees by reading the fine print in your contract. Also, cut up and close your old credit card(s) so you won't be tempted to put new charges on the accounts you just paid off. Lastly, make sure you finish your paperwork and pay at least the minimum amount due during the money transfer. If you don't, you could end up with extra late fees and penalties, and it could hurt your credit score. If you follow this plan, you'll be able to get the best transfer credit card for your needs, make the most of the opportunities, and avoid the nightmare of bad credit and too many bills.
