Balance Transfer Credit Card Traps

If you want to use 0 balance transfer credit cards to relieve debt you are not alone. A lot of people have used this option both successfully and unsuccessfully. You can learn from their mistakes by trying not to fall into balance transfer traps.

There are a lot of good things to be said about 0 balance transfer credit cards. They can save you loads of money on interest fees. All of that money you saved can be applied to your balance allowing you to pay it off early and saving even more money. Doing all of that can improve your credit file which can lead to better rates on future loans and credit cards. It really can be a win-win situation. But, there are a few traps that you could fall into when you choose to do a balance transfer for debt relief. As long as you are aware of these traps you are much less likely to be a victim of them.

Traps of 0 balance transfer credit cards

• Purchase and cash advances. In almost all cases these two transactions carry different interest rates then your balance transfer. When you have a credit card you should know that your payments are applied according to negative payment hierarchy. What this refers to is the practice of applying all of your payments to the debt that earns the least amount of interest. So, if you are using 0 balance transfer credit cards obviously your balance transfer has the lowest interest rate. That means that until it is completely paid off your purchases and cash advances will sit, unpaid, gaining interest. This could add up to a lot of money over time so it is best not to use your balance transfer card for anything else until the original debt is cleared.
• Fees. Most cards charge some fees application, annual, even a fee for the actual balance transfer. Usually the amount you save in interest costs makes these fees worthwhile but not always. It is important that you tally up all of those charges and make sure that you do not wind up spending more on your balance transfer then you would have if you had simply left things as they were.
• Promotional deal terms. Remember that your low interest rate is part of a promotional deal, should you fail to meet the credit card companies terms the rates could get snatched away. The terms usually include making all of your payments on time so be sure to set things up in a way that you never miss your payment deadline.
• Keeping track of dates. Two important dates to remember are when you have to make your balance transfer by to get the reduced rate and when that rate expires. The goal is to have your balance paid off or as close to paid off before the promotional period expires.

As long as you can avoid these traps 0 balance transfer credit cards have the potential to rescue your finances. They can save you money and offer a nice reprieve from the stress that comes with having high credit card balances.