Credit cards come in many different formats to help people who need access to extra finances to cover certain expenses. A lot of people today use credit cards to help them stagger some of the larger payments that they need to make in life. For example, you might find that you can’t really afford to pay for a much-needed trip out of town on a couple of months of wages, particularly after all of your bills take a bite out of the pot, but with a credit card, you can book the vacation and pay back what you owe a small amount at a time.
The problem that many of us have with credit cards, is that it’s a lot easier to go out and spend money on these financial products, than it is to actually pay that money back. It’s easy to use your credit card to make purchases when you can’t afford items yourself, but you will eventually need to pay that money back, and eventually, debt can begin to build. This is particularly true in cases that begin with a short interest-free period that gradually expires, giving way to high-interest rates more significant than we can afford.
Introducing Balance Transfer Credit Cards
If you’re struggling with the repayments on your current credit cards, then you might find it helpful to switch to a balance transfer credit card, which can help you to save a lot of money on your typical interest payments. Usually, in exchange for a limited transfer fee of perhaps 3% of your total balance, your balance transfer card can give you a period of interest-free repayments that lasts anywhere between 12 and 34 months.
In other words, you can simply swap your debt over to a card that has a lower interest rate than the card that you’re currently using, so as to make it easier for you to pay off your debt more comfortably. Keep in mind that the rate you’re given might only apply to balance transfers, and not purchases, which means that you might end up paying a higher rate if you make new purchases using your transfer card. Additionally, you’ll start paying interest again after the introductory period has expired.
So, if balance transfer cards can be so useful in helping people to regain control of their spending, and their debt, why doesn’t everyone get one? The answer is simple, there are a few things you need to know about these cards before you begin filling in your applications.
Timing is Very Important
When it comes to balance transfer cards, it’s important to remember that, like other credit cards, these financial products are designed to seduce you into their grasp with small initial rates at first, before they can start to earn more cash when your terms fall back to the original rate that the lender provides. If you decide to take out a new credit card through a balance transfer, it’s important to make a note of exactly how long your new low rate lasts, as this is crucial, and more important than the actual rate you need to be aware of.
Once you understand the terms ahead of you, make sure that you remember that you’ll need to either transfer again to another card, or clear your balance a month before your ending date. Another thing to remember during this process, is that the rate that you see advertised for a particular card might not be precisely the same as the one that you are offered. The rate awarded to you will depend on numerous factors, including your credit score.
Speak to Providers and Cover your Bases
Before you start picking your balance transfer deals and filling out the correct applications, remember that few things will make your credit card provider offer you incredible deals faster than the threat that they might end up losing your custom. If you have seen an attractive deal for a balance transfer card on the market, you should consider speaking to your current provider before you instantly jump ship. These individuals may be able to offer you similar deals that mean you go through less paperwork in the long-run.
Additionally, remember that even the best credit cards will still expect you to cover the minimum repayments that are set for your particular debt – even if those payments are very low. Keep in mind that the costs for missing a repayment, despite the cheap rates, could be very high, including the end of your deal, or a switch to higher rates.
Don’t Spend, Just Pay Your Debts
Finally, a balance transfer card is really only for one thing – clearing out debt. If you see yourself spending on your card too, then you could quickly get into a lot of financial problems. The reason for this is that any repayments made into your card will clear your spending first, before they clear your outstanding debt, and the money that you don’t clear could be charged interest at a much higher rate.