Credit card debt is on the up. More people than ever before are fighting to pay off excessive card spending, and although doing a credit card balance transfer can be a great way to free yourself of the debt, there are certain things to avoid when transferring your balance to a new credit card.
Here are our top tips on what to avoid when making a credit card balance transfer.
1. Make sure you understand your deal – Most balance transfer offers run for a set period of time. Many of the low rate offers have a life span of 6-12 months. After that period has expired your rate of interest will revert to your new lenders standard rate of interest which will be higher.
You want to try and have the balance paid off by the end of the promotional period, and that way you will not have to pay any interest.
Many people make the mistake of not checking the terms of their special offer, and then get caught by surprise when the deal ends.
2. Avoid spending – This is probably the area where most people make their mistakes. Although you may have an interest rate of 0% for 6 months, that rate only applies to the balance you have transferred.
Any new spending you do on the credit card will be subject to the cards standard rate of interest which will be much higher, and will end up costing you money in the long run.
If you can, put the card somewhere safe and only use it in a real life or death emergency.
3. Plan and budget – You only have your special low credit card balance transfer rate for a set time. For that reason it is very important that you plan ahead, making sure you can pay as much as possible each month in order to pay off the debt within the promotional period.
On months where you know you will have some spare money, pay more off your card balance, whilst during a month where things are a little tighter you can reduce your payment.
Planning in advance will help you stay ahead.
4. Avoid charges – If you make late payments to your new credit card you are likely to incur charges. It is vital you are fully aware of when payments are due so that you do not miss them.
If possible set up a direct payment so that your payments come out automatically. That way you will always be on time, and you can simply overpay as and when you can afford to.
