How to Best Use Credit Card Balance Transfers to Repay Debt
Credit card balance transfers can be used legitimately as a way to repay debt. One of the major advantages of choosing this method of credit is that a lot of credit cards offer 0% rates on balance transfers. A 0% rate ensures that after paying the initial arrangement fee no other charges are incurred as long as the debt is repaid or transferred elsewhere before the introductory period expires.
A second major advantage of this type of credit agreement is that you can vary the amount repaid each month to suit your personal budget. I’d always recommend repaying the maximum amount you can afford so the debt reduces as quickly as possible however if you need to pay less in certain months then the option is available. You can choose to pay less if you need the money elsewhere for example paying higher interest debts.
The third major advantage of using a credit card balance transfer to repay debt is that you can prioritize your debts so higher interest debts can be repaid first. Most credit card companies offer a low introductory rate and even a 0% introductory rate so if you are not able to transfer your entire debt to the card you can concentrate on repaying the other more expensive debts first. This ensures your debt costs you less in the longer term.
There are a number of things to remember if you choose to repay debt using a credit card balance transfer. The most important rule is to remember to always make at least the minimum payment on time to the credit card company. If you fail to do so you will most likely incur additional charges and possibly lose your introductory rate making this type of debt very expensive. Additionally late payments may result in more difficulty obtaining credit in the future. If a late payment is unavoidable contact your credit card company as soon as possible and explain any reasons why.
A second rule to remember is to pay the most expensive debts first. If you have additional forms of credit that are more expensive concentrate your payments on these to reduce your overall cost of borrowing. Once you have repaid the most expensive debt move onto the next most expensive and so on until your debt is repaid.
The third rule you should try to remember is to always repay as much as possible from your debt. Your introductory rate won’t last forever and the faster you can repay the debt the sooner you can forget about it. Try to not add additional spending to your credit card as this will be charged at a higher rate of interest than the balance transfer and it will increase the amount you need to repay.
When you sign up for the card make a note of the length of the introductory period of the balance transfer. As you approach the expiry date start to look around for a new credit card to transfer any remaining balance to. Don’t worry if you get turned down for the first one you apply for, there are lots of credit card companies out there offering introductory balance transfer rates. Once you have arranged a new card, hopefully at 0% interest on balance transfers, move your money from the old card to the new and destroy your old card. You’ll only pay a small fee for transferring the debt and if the rate is low enough you’ll pay no interest again.
Try to ensure that you live within your budget and do not use easy credit as a way of purchasing items. Any money spent on credit cards will eventually have to be repaid or you’ll face painful bankruptcy procedures that may affect your credit rating for years. It’s possible to clear all your debts using this method, depending on the size of your debts and the amounts you can repay each month. It may take a long time but you will eventually be debt free. I myself was in debt for several thousand pounds and used the above method to clear my debts and now live a debt free life.