The thing that you see in your mailbox this morning that states “0% interest, credit card offer” may actually be a lot more troublesome than you think.
If you’re a long time credit card holder, you might as well be more familiar with the term “balance transfer”. But if you’re just a beginner in the field, don’t be surprised if the first thing you see, when you wake up in the morning, is a messed up credit card bill on your mailbox.
If you are not sure what to do, you might panic. How can you get out of the muddy pit that you’ve led yourself into. First of all, credit card companies have different rules but very manipulative schemes. There is such a thing called “balance transfer” and it may help you solve your problem with your messed up debt in your current credit card. But mind you that this is not always an opportunity, used incorrectly it’s actually another bottomless pit you could get trapped with.
What is a balance transfer? It’s like salvation when you have nowhere left to go. If you can’t pay up to your first credit card company, you can choose another card company which will pay for your debt. As a result, you only transferred your debt to another company but maybe with a less or 0% interest rate. This time, you’re working to pay for a debt you owe on another company.
For example:
Debt on Company A = $3,500
Debt on Company B = $1,500
A new company (Company C) offers a 0% interest rate for 12 months regarding balance transfer.
The next day you ask Company C to transfer your debts from A and C. It will then pay Company A, $3,500 and Company B $1,500.
Company A and B are now free of debt, but you now owe Company C a total of $5,000 at 0%
The company that let you transfer your current debt from the previous one can offer you as low as 3% or even down to 0%. But you shouldn’t be blinded by these schemes. If you’re not sure how to handle these things, you should ask someone who knows, or research and learn. Usually they offer low rates to attract clients, but these things have some strings attached to it. Words are rather deceiving. The real intention is to drag you into a situation where you have no other choice but to gain more debts and pay more interest. Pathetic! You need to understand how things work.
It sounds so convincing and cool, but it’s not. Please bear in mind that you must never ever spend on a balance transfer card. Whatever you do, don’t spend on it or else your 0% would seem rather useless. Don’t spend, shift balances, or withdraw cash. These are some of the transaction types that you can do with your card. But it’s not the transaction that gives you the trouble; it’s the interaction that’s happening behind it.
Not spending on credit AT ALL is probably the best policy. Keeping credit cards around for emergency purposes is the best way to go–otherwise you’re just wasting money on finance fees.
Great points and one of the most important things to watch out for is the balance transfer fees.
A balance transfer credit card is a great tool to use, if and only if, you can use it to minimize the financing charges that typically accompany carrying a balance. Using that card to carry the balance, aggressively pay it down and, most importantly, don’t use it for ongoing purchases where the APR tends to be pretty high for these type of offers.