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4 Balance Transfer Tips

A balance transfer is one of the most effective and convenient ways of eliminating credit card debt. It basically involves moving all your unpaid balances from a current credit card to a new one. Transferring your balances will result in reduced credit card costs because companies normally offer lower interest rates when you move your account to them. Still, there are some pitfalls that you need to be aware of when moving your balances. The tips below will help you determine if you are getting a good deal.

Look for 0% Interest Rate on Balance Transfers

Credit card issuers offer lower interest rates for cardholders who transfer to them. But before you even sign up for a balance transfer, make sure that you have searched for 0% rate on transfers. This kind of deal has become less common nowadays because of the reforms passed concerning credit card regulation. Still, there are many credit card companies that offer zero-rated balance transfers.

If you have good credit scores and you always paid your credit card dues on time, then there is no reason for issuers to slap you with very high interest rates when transferring your balances to them.

Go for 0% Interest on Purchases

Apart from the interest charged when you transfer your balances, the new issuing company will also charge interest on the purchases you make using their card. This can be really advantageous because not only will you have zero rated balance transfers, but you will also enjoy 0% rate on your purchases.

However, this kind of deal has its own disadvantages. For one, the zero interest applied on purchases will expire ahead of the 0% rate on your balance transfer. So, you may end up incurring high interest charges on your credit card purchases when the applicable period expires. In the end, it is always a good idea to get a credit card that offers 0% on both balance transfers and purchases. If you can, choose a plan that applies the same expiry periods for the special rates applied on both balance transfers and purchases.

Know the Fees and Minimum Amounts Applicable

When transferring your balances to another credit card, it is wise to know the minimum amount that you can transfer. Some companies only accept large amounts of balances to be transferred to them. By raising the minimum amounts applicable, card companies lessen the chances that cardholders will be able to fully pay their balances before the promotional rates expire. When that happens, you will end up paying regular, if not higher interest rates on your purchases and remainder of your balance transfer. On top of all these, you also have to determine if the new credit card company will charge you with transfer or annual fees.

Avoid Late Payments

As a part of the balance transfer agreement, you will be required to pay off your monthly credit card dues on time. Any late payment would be tantamount to a violation of your contract with your new credit card issuer. As a consequence, you will lose the right to enjoy the low interest rates or any other promotional deals that come as a part of transferring your unpaid balances.