Avoid These Common Credit Card Balance Transfer Mistakes

Credit Card Transfer

That offer to transfer your credit card balances sounds like a pretty good deal, doesn’t it? Transferring balances from a high-interest rate credit card to one with no or a lower interest rate can save you a substantial amount of money if you don’t fall victim to these common mistakes.

1. Credit Card Balance transfer fees

Rare is the balance transfer offer that doesn’t come with some sort of balance transfer fee. It might be a flat rate like $50 or $75 but it’s usually a percentage of the total amount of each balance transferred. Maybe 3% doesn’t sound like much but if you’re transferring several thousands of dollars, that fee can be hundreds of dollars!

Avoid those without caps. If the credit card transfer balance fee ends up being more than you would have paid in interest had you not done the transfer, then don’t transfer!

2. Other interest rates

Purchases though, normally aren’t part of the no or low interest deal. In fact, you can expect the interest rate on purchases or cash advances to be just as high as or higher than the credit cards you’re already using to make purchases. If you’re serious about chipping away at your debt, which is really the best reason to take advantage of credit card transfer balance offers, then you really should stop accruing credit card debt!

3. Payment allocation

If you do transfer balances to the new account, and you do make purchases on this new credit account, you may be surprised to find that your payments are not allocated the way you thought (assumed) they would be. Say you transferred $1,000 and during the last month you made new purchases totaling $200. You make a payment of $300 thinking you’ll clear away the new charges and start chipping away at the balance transfer amount.

Well, as stated in the fine print, the credit card company allocated your entire payment to the zero interest balance because – well it’s not making any money on that amount.

4. Interest rate after intro rate expires

That low or zero interest rate won’t last forever and you need to know how much it’ll increase when the stated period expires. To keep this from happening – which negates any savings benefits you’ve reaped so far – make sure you have a plan for paying off whatever balance you transfer before the rate increases.

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