Use Low-Rate Balance Transfers to Your Advantage

One tactic that has the potential to save you hundreds, if not thousands, of dollars in interest while eliminating your credit card debt is to take advantage of attractive balance transfer offers. However, there are some things to consider when using this approach.

  • Pay attention to any fees related to the balance transfer. In some cases, the balance transfer may not be as financially rewarding if there is a large fee associated with completing the transfer. It is essential that you read all of the fine print and understand the terms of the offer completely. If there are any questions, call the credit card company and ask for an explanation. In some cases, you may even be able to call the credit card company and request that they waive the balance transfer fee.

  • Be careful not to open too many new accounts.  Often times the best balance transfer offers are for new accounts, rather than from the credit cards that you currently carry. While it is acceptable to open a new credit card, it is important to be aware that opening too many accounts may have a negative impact on your overall credit score.
  • Do NOT make any charges to the card used for the balance transfer.  When making a balance transfer to a new card, it is imperative that you do not continue to make purchases using that credit card. The credit card companies will almost always credit all payments to the balance with the lowest interest rate. This means that the $8000 that was transferred to the 0% rate will have to be paid before any payments will be applied to that $24.95 sweater that you just purchased.
  • Do NOT miss any payments or otherwise violate the terms of agreement.  Given that you paid close attention to the fine print, you need to be sure that you do not violate any of the terms of agreement such as a late payment or over the limit fee. Once you make a late payment, the credit card company will likely terminate the low rate balance transfer and raise the rate to the specified penalty rates. This can be quite damaging to your debt elimination efforts as the rate will likely be higher now than before the balance transfer. Always be sure to schedule payments with enough time so as not to risk violating the terms of agreement.

With a good understanding of the risks mentioned above, the use of low rate balance transfers can be a very valuable weapon in your effort to eliminate credit card debt. If the risks above sound too daunting, another option for potential savings is to simply call each of your existing credit card companies and request a lower rate on your balance. Too many people are intimidated to call the credit card company and ask for a better deal. Depending on the quality of your credit history, you may receive a pleasant surprise and it doesn’t take any more effort than making a simple phone call.

For information on the most attractive offers currently available, please reference the following resources:

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2 Responses

  1. August 15, 2006

    […] While this is a very basic example, it does help illustrate the point of how powerful the snowball method can be to eliminate credit card debt. When coupled with the leverage of low-rate balance transfers, the snowball method is an outstanding tool for debt reduction. […]

  2. August 23, 2006

    […] As an added bonus, keeping the credit card account open will likely provide opportunities for attractive balance transfer offers.  Once the credit card has been paid, you will likely begin to receive offers to transfer other higher rate debts to that card.  As mentioned in a previous article, low-rate balance transfers can be used to your advantage to save you thousands of dollars in finance charges. […]

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