Getting out of Debt with Balance Transfer Cards
Balance transfer credit cards can be a tool to help you get out of debt. Used wisely, no transfer balance fee credit cards or 0% balance transfer credit cards can give you that extra boost toward freedom from debt. If you’re religious about not charging anything more on your new card and paying as much as possible each month, you’ll find your debt dropping like a stone.
Consider the following strategies:
- No transfer balance fee credit cards: If you want to transfer a high balance to a new card with better terms, look for one with no balance transfer fee. Some cards impose a limit on the amount of fee they’ll charge, others don’t, but one with no fee at all is clearly best. Be sure to watch the interest rate, so you don’t get stung.
- 0% balance transfer credit cards: These cards may charge a one-time balance transfer fee, but the interest rate on the balance itself will be 0%, at least for a time. You’ll want to ensure you can pay the balance off, or transfer it to another card, before the time limit expires. After that date, the rate usually rises to a very high percentage.
- Tiered payment structures: These cards will allocate portions of your payment toward various rates and the fine print will tell you which interest rate receives the money first. A balance transfer credit card that puts your funds toward the higher-interest balance before the lower one is preferred.
Balance transfer credit cards are designed to bring new customers to the bank. The bank will not make much money with no transfer balance fee credit cards schemes unless you then carry a balance for a while. The same applies with the 0% balance transfer credit cards. During the 0% time period, the bank makes no money. They’re hoping you’ll leave a balance owing long enough for them to make a profit and often, they will have other fees in the “fine print” to help them make that profit. The way to protect yourself is to read all of the advertising and legal jargon before opening the account, so you know exactly how to make these cards work for you.
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