How to Take Advantage of Balance Transfer Credit Cards
There is an art to the balance transfer but to get the best out of this, pick one with a long time period and transfer again before any higher interest rates start.
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29 December 2008
How to take advantage of balance transfer credit cards
One of the biggest trends in recent years has been the use of a 0% card to do a balance transfer.”
The best way to use a balance transfer credit card is to pick one with a 0% rate of interest or very low interest rate, use it to pay off as much as your balance as you can and then transfer again if you haven’t managed to pay it all off.
One of the biggest trends in recent years has been the use of a 0% card to do a balance transfer.
If you have a balance - or several – sitting on other cards at any rate of interest it can be a money saving way to transfer the amount onto a 0% card.
You then concentrate on paying as much as possible off, with the knowledge that all your repayments are paying the debt alone, without having to service the added burden of interest.
0% comes with fees
Most 0% credit cards do carry a balance transfer fee. This can be anything up to 3% of the amount transferred, which can mount up if you have a large balance. It may still be worth paying the fee if it enables you to use the 0% period to pay as much as possible to the balance. Some card providers don’t have a fee but they are few and far between.
The art of using the 0% interest period is to transfer again if you have a remaining balance but want to use 0% interest to continue paying the debt.
It is essential that you do this in time however.
It takes around six weeks for a new transfer to be processed. Making a note to do this in advance will enable you to move seamlessly from one 0% offer to another without any (interest) glitches.
Don’t get caught out by using the same card for purchases
If you are using the same card for a 0% balance transfer and also purchases - be careful.
If the interest-free period only applies to transferred balances, you will be liable to paying interest at the full amount on your new purchases. This can be a typical APR of say, 14% to 16%.
It is likely that your purchase debt will be the last to be paid which means that it will keep on growing until your balance transfer is paid off. This defeats the object of doing the balance transfer in the first place.
It is best to keep your balance transfer card separate to your purchases card. If you don’t want to carry too many different credit cards keep one for balance transfers in a safe place and use it to pay the balance, rather than purchasing with it.
You can use another card for your monthly expenses that you pay off each month. This way you’ll be paying zero interest on purchases and zero interest on your balance.
This is a good way to manage your finances and use a balance transfer card to its best advantage.
