Making a balance transfer between credit cards, either in whole or in part, can be a costly endeavor depending on the cards you're using to perform the transfer. Before making a transfer or even signing up for cards with this capability first look at the advantages and disadvantages of using this function below.
Does the card feature an introductory interest rate?
Depending on the credit card and your own credit history, you may be able to obtain credit cards with low or zero interest rates for a fixed term. These introductory rates usually apply to all functions available with the card and may last a few months or even as long as a year. Transferring a balance from another card to a card with no interest can make it infinitely easier to pay off that balance.
What is the interest rate after the introductory rate expires?
You should of course know this information before taking on any card, unless your sole motive is to use the card during the introductory period only and then make little to no use of it afterwards. It goes without saying that paying off as much of the balance as you can before the regular rates kick in is a wise idea.
Are rates different for different functions?
Many cards have a setup like this, whereby different functions like balance transfers, purchases and cash advances will all have differing APR's. Likewise, some of these functions may not be subject to introductory rates, while others will. Having a card that has the best rate for the purpose you are most likely to use the card for is important.
What are the balance transfer fees?
Even if your card has an introductory rate on balance transfers, there may be a balance transfer fee assessed as well which may not be covered by the introductory offer. These fees could range from $2 to $5 per transfer, so be sure you know about any of these fees before making transfers.
What is the default rate?
This rate is the highest interest rate charged by your credit card company, and will take effect on late payments or over-the-limit balances. Even cards with or even very low regular rates may have large default rates, so be to never incur these rates firstly, but also make sure you know what they are and how and when they will take effect.
Credit cards can undoubtedly be a useful and advantageous tool, provided they're used wisely, of course. Unfortunately, statistics indicate that a staggering number of people are deeply in credit card debt, many of them completely unaware of the financial peril they've placed themselves in.
Make an Honest Assessment
Too many people make the grave mistake of looking at their credit card's limit as the amount of their debt when making an overall assessment of their finances. For example, if a card's limit is $1,000 and the cardholder has charged $900, they are not actually $900 in debt, but more realistically, two or three times that amount, depending on the interest rates, and whether or not they'll be assessed any late or over-the-limit fees.
Make a list of every card, the limit, the balance due, the minimum payment amount, and also, how long you've had the card. Create a plan that you'll be able to follow that takes all of your financial obligations into account. Having a plan and sticking to it may seem simplistic, however, the fact remains that those who follow a budget are statistically far less likely to succumb to debt or ever have to file for bankruptcy.
Spend Responsibly
Needless to say, only you are in control of what happens to your finances, unless of course you do have to file for bankruptcy, and then you've got a host of legal issues to deal with. One good rule of thumb to follow is to never use your credit card for an item or service that you won't still be making of use of, or have, when the bill arrives.
Also, if you're going to have a credit card, you might as well make sure that it works to your benefit by taking advantage of the various reward programs available. When comparison shopping for the best type of card for you, take into account what you'll be using the card for before settling on one.
Easy Ways of Saving Money
Here are just a few easy ways you can save money each and every month, money that will be better spent paying off your debt, essentially freeing up more of your income for the future.
- Packing a lunch for one person for only five days out of the month can save at least $50. Imagine what you'd save if everyone in the family did that for at least two weeks each month.
- Likewise, eating in more often instead of ordering or dining out will also help to cut down on expenses, and it's never wise to use a credit card to pay for items such as food. Buy your food in bulk if possible, spend one day cooking and preparing meals, freezing them for use throughout the week, which is especially helpful if you have young children.
- Coupons do count, so use them whenever possible. This isn't to say you should purchase an item simply because you happen to have a coupon for it, but rather comparison shop, making use of savings and discounts whenever they'll benefit you the most.
- Find inexpensive ways of being entertained, such as free concerts or plays in the park or your local community center, and add the money you've saved on your next month's credit card bill.
- Instead of buying expensive gifts and cards for everyone you know, why not make handmade presents and cards instead? They're almost always treasured more than something store bought with little thought to the recipient.
Debt doesn't occur overnight, and neither does recovering from it, however, by honestly assessing your financial situation and following the above steps, you'll soon be on your way to changing it for the better.
Both Caden Flynn & Shirley Bullington are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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