If you find yourself struggling with debt then a balance transfer credit card might be the perfect tool for you. Just be aware that if you don’t use them properly they can end up hurting you more than helping. Before you make the decision to apply for a balance transfer card make sure you are aware of these common, but avoidable mistakes.
Not Figuring out the Transfer Fee
Most balance transfer credit cards will charge you a fee of 3%-4% on the balance that you are transferring. A lot of people might assume that because you are moving to a credit card that has a 0% APR that you are automatically coming out ahead. Instead you need to always do the math to see what makes the most sense for your individual situation.
If you have a balance that you might be able to pay off in the next one or two billing cycles then it might make more sense to skip the balance transfer card. Doing the math is the only way to truly find out what is best for you.
Being a Procrastinator
Once you apply for the balance transfer credit card there is still work to be done. Don’t tell yourself that you can start paying down your balance in a few months because that can easily end up being 12 months and your introductory period will be wrapping up soon.
Start making monthly payments to pay down the credit card as soon as you receive your approval. If you have a balance of $5,000 and your introductory period is scheduled to last 18 months then promise yourself that you will make a $278 payment each month.
Making a Late Payment
Some card issuers add into their fine print that if you are late on any of your payments they can discontinue your balance transfer rate. This could happen even if you are just one day late. Make sure you set a reminder for yourself or set up an automatic recurring payment through your bank or directly with the credit card issuer if the option is available.
You Open Too Many Credit Cards
The worst thing you could ever do with a balance transfer credit card is fail to pay it off and find yourself applying for a second or even third balance transfer card. Creditors will see this behavior and it will negatively affect you if you are thinking about taking out any kind of a loan. This is why it’s important to plan and pay the card off right the first time.
Frequently you will receive mailings from your current credit cards offering a balance transfer with a promotional rate. They can be a great option, but you need to be aware that the promotional rate will only apply to the balance you are transferring and not to your current balance unless stated differently.
Wrapping It Up
Balance transfer credit cards can be a great way to help reduce your debt and get back on track financially. They need to be used the right way or you can find yourself in a worse position than when you started.
*Editorial Note: Any opinions, analysis, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.