If you’re like most other Americans, you carry a balance on your credit card. You’re probably wondering how you can lower the amount you pay. A tempting offer is a 0% interest rate on a balance transfer. It’s a good deal, because it basically means that for up to a year, the credit card company is lending you free of charge. That means saving a lot of money, if you have what’s known as a revolving balance.
The average American household carries at least $10,000 in credit card debt. For some, it’s a lot more. Most families end up paying over $1000 in interest on that bill per year. And, to make the problem worse, most credit cards have a “locked in” rate that’s almost always higher than 10%. This statistic explains why those balance transfers are so tantalizing, and why a lot of people get so excited that they fail to read the fine print. If you’re thinking about a balance transfer, you definitely want to read the agreement fully. That way, you know what you’re getting into.
These offers are usually made to those with top-notch credit, but if you’re offered a 0% balance transfer, stop and think. If you have trouble paying on time and you don’t plan enough, you might just get slapped with a big rise in your interest rate before you know it. It’s a losing proposition for someone who doesn’t have their spending under control. They, like everyone else, will have to pay up eventually, and probably at an astronomical interest rate. The ideal balance transfer candidate wants to pay off their debt, and has a plan in place to get it done. Read further, and you’ll get some tips on how to make a balance transfer work for you.
Things you should know and take into consideration:
- Don’t underestimate the credit card company. They aren’t being nice by offering you a balance transfer, they’re playing the odds that you won’t pay the balance before the 0% interest grace period’s up.
- No guarantees, ever. A low introductory rate doesn’t mean that you’re guaranteed to get it, and this applies especially to those with tarnished credit. Make sure that you read the agreement when you get the card and the rate is in fact 0%.
- See if your card offers 0% on purchases as well. Not all do. And, the offer requires that you pay off the transferred balance first, and new charges after that will have a higher interest rate.
- Be selective. Don’t let that 0% make you blind to the card’s disadvantages. Of course, you want a card with no annual fee, but it pays to also look for a cash-back offer and fraud protection. If you decide to keep the card after you pay your balance, you’ll be glad you did.
- Make sure it’s actually free. Some companies charge a fee for each balance transfer. Check the fine print, again.
- Pay the bill on time. If you’re late, even once, your interest rate will rise, and you’ll get penalty fees. To make sure you pay on time, set up an automatic payment. Be sure that you pay more than the minimum, though, so the balance goes down.
- Keep track of when the 0% deal ends, so that you can transfer a balance again before that date.
- Know when to quit. Credit card companies will know when you’re “card hopping”, and it will show on your credit.
With the tips we’ve given here, you should know now whether a 0% balance transfer is appropriate for you. Take a look at the fine print, shop around, and get the best deal possible. Good luck, and responsible spending!
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- Finding answers about credit card limits
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