Avoiding Credit Card Balance Transfer Booby Traps
Christmas has been and gone, the tree is gathering dust once again in the linen cupboard, and the number of light-pollution complaints about over-zealous Christmas lights participants has seriously diminished - at least for another 12 months! It's January, and your credit card is struggling to hold it's own weight under the enormous burden you've placed upon it in the last month. What better time to take advantage of the numerous 0% balance transfer options that are floating around?
By taking up a 0% balance transfer option you will not pay interest on the amount you owe for a certain period of time - usually six months. However, you will be required to make regular repayments. Six months could be just enough time for you to pay it all off, in which case you would pay no interest. Wouldn't that be nice? Of course, it would require some discipline, and continuing to spend during this interest free period could land you in serious hot water if you've got nothing to show for it at the end of your interest free term.
But, all things aside, low interest promotional offers can be of genuine benefit. There are, however, a few tricky catches you should be aware of, or you may end up with fees and charges up the wazoo!
The New Purchase TrapOnce you've done the balance transfer, don't use the new card for anything until the balance transfer amount is paid off in full! You see, payments you make to the card will usually bring down the balance of the original transfer amount first, which means that anything you spend on the card will attract the highest interest rate until you've paid off the original balance transfer in full. Use a separate card for every day spending, and leave the new 0% balance transfer card at home!
The Interest Rate TrapMissing a payment could see your 0% rate increase substantially. Ensure you make every repayment on time, or you may end up paying more than you would have if you'd stayed with your old card.
The Balance Transfer Fee TrapRead the fine print. Some providers may charge a transfer fee when you first take up the offer. While the majority don't charge this fee, it's always best to ensure you know exactly what you're getting yourself into.
With a little discipline, and regular repayments, transfer offers can genuinely save you money on interest you would have otherwise had to pay. If you're prepared to do a little research, the benefits can really add up.
How do I compare credit cards?RateCity is the best website to shop around on for all credit cards, as well as most other financial products. At RateCity, you can use expert comparative data from CANNEX, Australia's leading financial research and ratings firm. CANNEX has analysed and evaluated hundreds of financial products to award five stars to only the very best. The CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product.
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