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Do you have a nagging balance on one of your credit cards? Did you know you can pay it off, and save hundreds of dollars at the same time? A balance transfer credit card will help you do just that. This type of card lets you bring over an existing balance or loan and pay it off at a lower interest rate. Here's how to get the most out of a balance transfer credit card.
Transfer the Balance
Before applying for a balance transfer card, you'll want to check out your options. First look at the fees involved, as these may vary from card to card. Many companies charge a certain amount to bring over an existing balance. The usual rate is around 3 percent of the total amount, and some cards include a cap of $50 or $75. In most cases, the money you save in interest will outweigh the cost of transferring.
Also compare the interest rates. Balance transfer cards usually come with a 0% APR period. This means that you will have a certain time, usually between six and twelve months, during which you will not be charged any interest. You can use this time to pay off the balance.
Get the Most from it
Once you've found the best balance transfer card to apply for, it's time to pay off the debt. Ideally, you will want to pay it off within the initial zero percent interest timeframe. Say you transfer a balance of $2,400 and you have twelve months of 0% APR. All you need to do is put $200 toward the debt each month for twelve months. Pay that amount at the beginning of each month, or every time you receive a paycheck.
Think about it: if you pay off the $2,400 balance on the card within a year, you will save hundreds of dollars. If your previous card charged 18% APR, and you carried the balance for a year, you would have to pay $432 in interest! That is a significant savings.
If it becomes difficult to pay $200 each month, reduce the amount you pay to $150. Then keep paying that amount until the entire balance is paid off.
Use the Card
Many experts recommend paying off credit card debt before using a new card. This rule of thumb applies to balance transfer credit cards too. Some cards are set up so that if you make new purchases, the amount you pay each month will first be applied to those, and then to the transferred balance. This can make it hard to pay off the balance in its entirety. To avoid problems, don't use your new credit card right away. Put it in a drawer until you have paid off the balance.
Once the debt is paid off, you can begin using the card. Many balance transfer cards come with additional perks such as rewards programs or cash back options. So when you start shopping with the card, you will receive even more benefits. Try to pay off the amount on the card each month to avoid interest charges and late fees.
A balance transfer credit card can help straighten out your finances. Apply online for one today and you'll notice the difference right away. Soon you'll be debt-free, thanks to your credit card.
Got credit card debt? Transferring your debt onto a card with a lower interest rate may sound like the perfect solution...and it can be. But the secret lies in paying attention to the details when you apply for a balance transfer credit card. To benefit as much as possible with one, try following these tips.
Check the Fees
When you're looking for a balance transfer credit card, pay extra attention to the fees involved in the transferring process. Many will charge a certain amount for bringing the balance from a different card onto the new one. This amount is usually expressed in the form of a percentage rate. So if you are transferring $2,000 and the fee is 3 percent, you'll have to pay $60 for bringing the amount onto the new card.
In most cases, the balance transfer fee will be relatively small, and you will still save a great deal of money in the process. This is because balance transfer credit cards grant you a certain amount of time during which there is no interest charged to the balance. This gives you a chance to pay off the amount you owe without having to worry about extra charges.
Back Away from Purchases
Having a new credit card may make it tempting to start buying new things. With a balance transfer one, however, you'll want to avoid shopping with it. This is because while you will usually get a very low rate, or even a zero percent interest rate, on the balance, you will be charged a higher rate for the new purchases. So stay away from the mall, and focus on paying off that debt.
Pay it off during the Introductory Period
This is one of the best ways to benefit from a balance transfer credit card. Find out how long the 0% APR period lasts, which is the amount of time that no interest will be charged to your transferred balance. Then take the amount you owe and divide it by that timeframe. Say you have a $6,000 balance that you bring over to the card, and you have 12 months of zero percent interest. By paying $500 each month for a year, you'll wipe out the debt. During that time, you will also save hundreds of dollars in interest.
Learn from the Past
If you need to transfer a balance, there's probably an underlying reason that explains why you need to do so. You may have fallen into debt problems, or perhaps you had an emergency come up and needed to dip into your credit cards. Whatever the reason, it's important to evaluate how you got where you did. Then form a plan to help avoid falling into debt problems in the future. You may want to build up your savings, or focus on paying off the balance on your cards every month.
Balance transfer credit cards can be a great way to get rid of debt. But they can work against you if you don't use them to your advantage. So pay attention to the details, set up a plan, and work to pay off that balance. You'll be out of debt and into a better credit future in no time.