How to Step Into the Balance Transfer Bandwagon With Caution

How to Step Into the Balance Transfer Bandwagon With Caution

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By Angela Brown

With the economy remaining in a sluggish state, many people are looking for ways to reduce their monthly expenses and free up some cash. Some consumers are famous for their reckless spending habits, a practice which has gotten them into serious financial trouble.

There are debt consolidation options that help consumers manage their debt problems. Among these options, transferring a credit card balance to a low interest rate credit card can be a smart decision, what is known as the balance transfer method. Instead of running to debt consolidation nonprofit companies for help, you can opt for the balance transfer method.

The following are some tips to consider before going for balance transfer method:

  • Look for new purchase promotions: There are credit card companies that will reward you for transferring your entire balance to a low interest rate credit card. Those rewards may include points toward gifts, free hotel stays, airline miles and more. Some cards charge zero interest on new purchases, while others charge a low interest rate for the first 12 to 15 months. Compare offers and choose the card that is right for you.
  • Exercise extreme caution: Some balance transfer deals seem attractive at first glance, but with a second look may not offer a particularly good deal. As with any other credit card, late payment penalties on a balance transfer card can be severe, causing you serious financial trouble. Some companies charge transaction fees, usually 3 or 4 percent of balance transfer, for the privilege of securing a low rate credit card. Read the fine print to know what costs you will incur.
  • Transfer with care: Initiate your balance transfer carefully, by continuing to make the minimum monthly payments on your old credit card before the balance transfer has been completed. Resist taking on additional credit and verify that the interest rate originally quoted is what you will receive. A lower credit score can mean that you’ll pay a higher rate. Understand the terms of your contract.
  • Make you balance transfer work: If you end up with a super low interest rate card, you must consider how much money you’re saving by consolidating your debt. For the ensuing three months, your credit card monthly payments should be greatly reduced, so consider putting those savings in an emergency fund.

As always, consider your options when transferring credit card balances. You don’t need the help of a financial adviser including debt consolidation non profit companies to arrange a transfer, but if you’re problems are much deeper, then outside assistance may become necessary.

Author Information

Angela Brown is a contributing writer for a US-based debt communities. Brown’s expertise in the consumer debt industry has given her the opportunity to contribute her work to several financial websites. She writes on the topics including debt consolidation non profit , debt settlement, bankruptcy and related topics.

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