How to Avoid any Balance Transfer Mistakes?

The credit card balance transfer offers always sounds like a pretty good deal, don’t you think so? I think it is a good deal but it also requires you to take out your magnifying glass and start reading all the fine print that comes along with the offer.

This is a fact that many people don’t realize that the lender making such an unbelievable offer wouldn’t be doing so if they are not getting any financial benefit from it. Of course  such companies are not working as non-profit organizations.

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They know that those people who are in need to transfer their balance usually don’t pay attention to the terms and condition of the contract.

Common Credit Card Balance Transfer Mistakes

Here I have mentioned few common credit card balance transfer mistakes. If you don’t fall victim to these then transferring balances from a high-interest rate credit card to one with no or a lower interest rate; can definitely save you a substantial amount of money.

Balance transfer fees

It is rare case if someone finds balance transfer offer without any balance transfer fee associated to it.  Usually  a balance transfer fees is a percentage of the total amount of each balance transferred.

Maybe you think that 3% is not a high percentage but if you’re transferring several thousands of dollars, then you have to pay a fees in hundreds of dollars!

Other than this you also have to see that if there’s a cap or not on how high the balance transfer fee can go. Avoid those that are without caps. So before taking any advantage of an offer, always calculate first. If the balance transfer fee is higher than the interest you would have paid if you had not done the transfer, then don’t opt to transfer!

Other interest rates

While may be you get low or no interest on balance transfers, but you’re still getting a new credit card. What it means is that you’ll still be able to use it to make purchases. Purchases that you do with that credit card are normally aren’t part of the no or low interest deal.

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In fact, it is expected that the interest rate on purchases or cash advances could be higher than the credit cards you’re already using for making purchases. If you really want to pay all your debt, then you really should stop accruing any further credit card debt!

Payment allocation

When you do transfer balances to the new account, and also make purchases on this new credit account, then you must be surprised to see that your payments are not allocated the way you have assumed them to be. For instance you have transferred $1,000 and $200 purchases are made by you during the last month. And then if you make a payment of $300 assuming that you’ll clear away the new charges.

Next time when you get your statement for new billing cycle and find that the $200 in new purchases is still there in addition to that there are a couple of new charges that have been made by you since then. All those purchases are having an interest  of 16, 19, 22% or more! Now what to do? Well, the company has stated in the fine print, that they have allocated your entire payment to the zero interest balance which made you think that it is not making any money on that amount. But indeed they are making their money on those new purchases!

Interest rate after intro rate expires

You have to keep in mind that low or zero interest rate won’t last forever and you have to find out that how much it’ll increase when the stated period expires. That’s due to the reason that any balance remaining afterwards is likely to be whacked with a much higher rate. To avoid this from happening you have to make sure that you have to plan to pay off whatever balance you transfer before the rate increases. Also you have to ensure that you don’t miss a payment or make payments late.

So these are few things that you have to keep in mind before transferring any balance to new credit cards. So watch out for these mistakes and make your balance transfer beneficial for you.

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  5. Nice tips these will help me a lot. Thank you for sharing

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