2) Credit Card Balance Transfers (0% APR for 12-18 months)(2 of 7)
2) Credit Card Balance Transfers (0% APR for 12-18 months)(2 of 7)
Balance transfers are a great way to reduce your monthly interest rate. The main things you need to look out for are the following.
A) Make sure the new credit card company gives you enough Credit Line
When applying for a new credit card to transfer the balance to make sure they will give you enough credit line to transfer the FULL balance. Since you already have a high amount of debt, your credit score may be lower then when you applied for your last credit card.
Example of what you may not want to happen: You have $10,000 in debt and apply for a balance transfer. However, the new C.C. company will only give you a $5,000 credit line. Although it’s good that you have 0 interest on half (5K) of your debt, you now have to make 2 payments per month. This is however still better play because you’re lowering your monthly interest rate.
B) Know what the interest rate is after the O% APR terms.
The reason a lot of credit card companies offer 0% APR is to not only to get your business and hope that you spend more, but the interest rate after the 0% APR term might be a lot higher then what you’re currently paying. This is okay if you stick to a plan, pay the card off within the 0% APR term, and cancel the card after it’s paid off.
C) Do NOT default on a payment.
If you look closely in the terms and conditions, defaulting on a monthly payment may activate a much higher APR interest rate. This means that you could now be in a worse position by paying a higher interest rate then you were with your previous card.
D) Do not use the credit card after the balance transfer is completed
If you make purchases, you’ll be charged an interest rate on purchases. Then, when you make payments, most credit card companies automatically apply the payment to the 0% APR balance while the interest on your purchases accrues.