Before there can be any relief found in a credit card’s monthly statement, consumers have to begin to study their spending habits. Some people think of it as a process similar to weight loss. If you want to lose weight, use more energy than you eat. That is, find a balance between exercise and proper eating habits and you’ll soon be able to manage a healthy body weight.
Likewise if you want to save money. The saving money equation is simple; money saved equals the money earned less the money spent. Luckily there are some money saving card features to help consumers establish a balance between their earnings and their spending, but there are also traps to avoid as well.
Consider a Balance Transfer Credit Card
Balance transfer credit cards typically offer a low APR during a promotional time frame. Some balance transfer cards even offer 0% interest. Transferring the balance to a new lower interest rate card can help with budgeting as it can lower monthly payments or even suspend them for awhile while a stable financial footing can be adopted. When choosing however, some investigation is required as they are not created equally.
Often balance transfer cards offer a lengthy introductory period with no interest charges. Some have a honeymoon period with zero interest for 18 months. For example the Discover More Card offers 0% interest on balance transfers for a full 15 months. The Citi Platinum Select MasterCard offers a 0% introductory rate on transfers for 12 months.
The process of transferring accounts to lower interest cards can be beneficial to people with overdrawn statements. Once consumers have signed up for a new card the details and balance of the old card are transferred onto the new card. Remember, the balance transfer rate applies only to the amount transferred over to the new card.
Some balance transfer cards do offer an introductory rate for new purchases, but after the specified time is up, new purchases are subject to the usual APR of the card. Take for example the Citi Dividend Platinum Select MasterCard has no intro purchase APR and the Citi Forward Card offer 0% on new purchases if consumers qualify. It pays to investigate the length of the introductory period.
Traps to Avoid
• Know how payments will be applied on the card. Even though the card has a 0% rate understand how the money that is being used to pay off the balance is being used. Often the money used goes directly to pay off the transferred amount first. This means that if additional purchases were done, they may not be eligible for the lower rate.
• Know the interest rate on new purchases. Consumers often get lulled into a sense of complacency and think that they will have a low interest rate on new purchases. Although some cards offer the low or zero introductory rates for the new purchases (such as the Citi Platinum Select MasterCard) some cards identify that “any transactions made other than with this offer are at the standard credit card rate”. Reading the fine print will identify things like, “0% introductory rate excludes cash advances”, so be sure to ask or identify what the rate will be.
Getting a low or 0% APR card to transfer the balance can save consumers money by consolidating their debt and help them get their finances under control. It is important that consumers understand how their payments are being applied to the card and what the introductory rates cover.