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Avoiding the Pitfalls of Credit Card Balance Transfers

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									         Avoiding the Pitfalls of Credit Card Balance Transfers

As more of us struggle to pay off high interest debt, 0% or low rate balance transfers are
coming to the rescue. Or are they? Balance transfers can be really handy, provided you're
aware of some of their shortcomings. Here is our list of the top 7 things you need to know
when contemplating a balance transfer.

Always make your payments on time
It's very important to make payments on your transfer on time. These types of accounts
generally make prompt payments a condition and if you skip or miss them you could be
heavily penalised.

Know when the low rate period ends
Most balance transfer deals have an introductory low or no rate period which is usually
three, six, nine or twelve months. In order to make the most of your transfer you need to
know when this introductory rate ends. Make note of the date and work towards getting
the majority of your credit card debt paid off by this time.

Read the fine print
As with any banking product, make sure you read the fine print associated with your
card. If you're unsure of any conditions, speak to a customer service representative before
you apply.

Don't use the card for cash advances
Cash advances on a low or no rate balance transfer cards are a no no. These cards are
really handy to pay off large amounts of accumulated debt, they're definitely not designed
for withdrawing cash or making purchases. Cash advances always attract a higher rate of
interest and they'll eat into any potential savings. In addition to a high interest rate, any
cash advances will be treated differently from the transferred debt and can only be paid
once the entire balance transfer has been paid off, see below for more information.

Don't get tricked by payment hierarchy
Payment hierarchy is something that all credit companies do and it can catch consumers
out. Here's how it works - you transfer a debt of $4000 to your new 0% balance transfer
card. You also use this new card to make $1000 worth of purchases. Any payments you
make will be applied to the debt that is attracting the lowest interest rate, in this case it
would be the balance you transferred. Any additional purchases attract a higher rate of
interest and would only be paid off once the total of your balance debt is paid.

Don't leave it too late to switch
A lot of transfer offers are only available for a limited amount of time after you've opened
your credit card account. The key is to get the balance transfer happening as soon as you
have the card in your hand. To help you with this, a lot of card providers give you the
option of automatically transferring the balance and closing your old account upon
activation of the transfer. This is a great way to make sure you're making the most of the
interest free or low interest period associated with your new account.
It pays to shop around
The key to finding the right deal to suit your financial situation is to shop around.
Balance transfer offers are becoming commonplace and all the banks are vying for new
business. Pay attention to what the banks are advertising and do a bit of research online to
see what deals are on offer. If you need a quick and easy way to find information about
balance transfer credit cards then use a credit card comparison website.

If used right, credit card balance transfers are a great tool for reducing credit card debt.
By doing a little research and understanding potential pitfalls before you sign up, you can
save yourself some money and a lot of aggravation.

								
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