Focus on the future beyond balance transfers
1 May 2008
Balance transfers for credit cards can help you to reduce your debt in a very short period of time, but if you don't also consider the other features of the credit card then you could easily end up needing balance transfers again. To avoid ending up in the same situation a year from now, pay close attention to the other features of your balance transfers credit card.
Ongoing interest rate and how your balance is affected if not repaid in the balance transfers period
A low ongoing interest rate can be a vital concern if you cannot pay the entirety of your balance transfers before the end of an interest free or low interest period. You must also pay special attention to how this remaining amount will be treated, as some credit cards will apply the cash advance rate to balance transfers if they aren't paid off in time. If your debt is large enough that you will be paying it off after the balance transfers period has ended, you should make sure to check on these details.
A reasonable credit limit
If you want to reduce your debt, now is not the time to extend your credit limit if given the opportunity. You would probably be better off reducing it to a practical minimum and learning to use a credit card as an alternative means of payment but not as a line of credit. Balance transfers can help you to get out of debt if used correctly, but misuse could lead to hopping from bank to bank giving everyone a share of your debt pains.
Interest free days on purchases
Most balance transfers credit cards will require you to pay off balance transfers before any new spending can be addressed. This means that you must avoid using your credit card on new expenditure until you have repaid your balance back to nil. If you spend before you've repaid your debt, then the new purchases are very likely to start accruing interest as 55 interest free days are only really useful if used to avoid interest entirely. Once the balance transfers are paid off, however, you will have to rely on interest free days to stay out of debt. Just being sensible with your credit card can go a long way to keeping in the black.
Please visit our comparison page for many credit cards offering generous balance transfers.
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