Tips on Balance Transfers
Balance transfers can be a handy thing when you need a little help to keep your credit up or if you just want a special rate. It can be helpful to have a new company paying off the old credit card so that you get an interest free period. With balance transfer deals you are usually going to find up to 12 months of interest free credit on the card. This means there is no interest for a period of time on a line of credit, but this is not always going to be offered.
When you use a balance transfer that is not a deal, other purchases or deals may be repaid first before the costly balance transfer. The purchases with the most expensive rate will be paid off last. If you have a promotional balance transfer option, that will be paid off first before all other payments.
The best option is choosing a card that has a balance transfer deal. In other words you shouldn’t use the card for purchases. When you make a payment you are paying towards the balance transfer because that is the only thing on the card. It allows you to pay it in full a little faster and if it is a zero percent interest deal, without interest. You won’t have interest charges to pay. At the end of the special deal, if you haven’t paid it off, you could transfer the remaining balance to a new deal.
In this case you should be careful when you change cards. You don’t want to become a rate tart. A rate tart is someone who constantly changes cards to get the better rate. This means you are not staying loyal to the card company in an attempt to get the best deal. By changing cards frequently you can harm your credit rating, especially if you close the other card out.
There isn’t a standard credit rating because all companies have a different process for approving credit, but there are three companies that keep track of your credit and other financial information that these companies view. When you change cards or send in a lot of applications you are limiting your credit rating.
Balance transfers don’t always help you get a new card. What it really depends on is the pattern of spending that you have. In other words, what is forming your credit score history? The company is going to look at your risk and the profit they can make from you. They want to see a card holder that will remain with a company for a long period of time and one who is a little slower in paying off debts. The ones that pay off debts in full every month are less profit for the company.
You can in some cases get better rates by staying with the same company. A lower balance transfer rate can be appealing, but have you checked with your card company recently or just switched cards without doing so? Most card companies will offer deals to their long term consumers as well as new consumers. You just have to ask for a rate cut or ask about a balance transfer option. Some of the cards in your wallet probably have some of the lowest balance transfer rates if you ask, but instead you have let the card go dormant.
There is another way to handle your balance transfer. You can continue to bounce the balance between two cards that have the lowest possible rates for existing consumers. As you bounce between cards you are making payments, but you are still getting a great bargain. The problem with this is that some companies will put a stop to it after a few months or years. It is rare, but they will stop you in some cases.
It is important that you use a balance transfer as an option of clearing up the debt that you have. Instead of adding to the debt you should clear it up. You can use balance transfers to trade from deal to deal when the deals expire, or you can transfer from expensive store cards. Just remember that the limit on the card may not be what you need to transfer the entire debt. The safe thing to do is have one card with the entire balance transfer at zero percent, and pay it off in the time frame allotted for that particular deal. There are at least five cards such as Ulster, Smart, Britannia, Norwich, and Sainsbury that have this deal. |
