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Credit Card Balance Transfers – what NOT to do

Updated on June 15, 2012

In tight economic times many people look to use a credit card balance transfer to buy some breathing room so they can reduce their credit card debt.

However to get the most benefit form a credit card balance transfer there are certain things you must avoid at all costs:

Don’t treat the low interest period as a payment holiday

A credit card balance transfer is a way to gain some breathing space for a limited period of time, ultimately allowing you reduce credit card debt. That’s why it is absolutely vital that during the low interest period you make plans to pay off as much interest as possible. Do NOT treat the low interest period as a payment holiday as this is just avoiding the fact that your debt needs to be paid off. Making payments during your low interest period is the best way to make meaningful reductions in your credit card debt.

Avoid using the new card for purchases or cash advances

New purchases and cash advances are charged at the full rate interest and NOT at your low balance transfer rate, and any payments you make come off the low rate balance first, meaning you could be carrying high rate interest debt on your card until the entire balance owing is paid off. Remember, the purpose for making a balance transfer is to reduce credit card debt, not to simply delay paying back the money you owe.

Don’t squander your opportunity to reduce your debt

Try not to view your card as something you can use for your day to day spending. The most sure-fire way to ensure your new card is used in the most beneficial way to reduce credit card debt and not to finance further debt is cut the card in half as soon as you receive it and make payments to the credit card account online or via phone banking. This will ensure that you can’t use the card and squander the lifeline the balance transfer has given you.

Be aware of your low balance expiration date

Make sure you are very aware of when your low interest rate expires, and keep this date in mind to help ensure you pay off as much of the balance as possible before your debt reverts to the full interest rate.

Don’t ignore your debt

To gain control of your finances and reduce your credit card debt you first need to confront it. Be honest to yourself about how much you owe and commit to a plan to pay it off as soon as possible. Ignoring debt will not make it go away – it will only grow larger and become increasingly less manageable the longer you ignore it.

Find a sustainable way to eliminate your credit card debt

Don’t make the mistake of thinking that you can simply transfer the outstanding balance of the card over to another balance transfer card when your low interest period expires. This may work once or twice however every time you apply for a card this is recorded on your credit file and this behaviour may have an impact on the willingness of banks to lend to you in the future. Besides, this isn’t a long term or sustainable solution and simply delays you from breaking free from your debt.


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