Best Balance Transfer Card Strategy

You can still find balance transfer cards among other rewards type of credit cards being offered to consumers.  The restrictions are tighter for obtaining them and the offers are no longer as attractive, but they can still work in a money saving strategy.

Just in case you are not familiar with balance transfer cards, they are credit cards with an initial offer of 0% interest for a pre-determined time on any balances that you transfer from other cards or even with the supplied checks that come with the account.  The draw of 0% interest allows you to take debt that you have tied up in other accounts and move it so that it can remain static with no interest charges.

This strategy will help you make the best use of balance transfer cards to help manage your debt load.  Credit card companies have pulled in the reins on these types of cards and so it will be more difficult for you to find them, but they still do exist.  Also, the card issuers are stricter about who can get one and who cannot.  This situation is a result of current economic conditions and the overall debt load of consumers and their ability to pay on their accounts.

One year ago it was common to find a 0% interest on a balance transfer card which was valid for 12 months.  That is no longer the case.  Now, the norm is 6 months.  This, plus the fact that there are now higher transfer fees that accompany the money when you transfer it to the card.  It used to be capped at $75, but now it is figured as a percentage of the amount you are transferring which can cost hundreds of dollars.

Aggregate account balances.  Once you have found a good balance transfer card offer, choose your highest interest credit card balances and transfer those over.  Be sure to keep in mind the transfer fee.  If you were able to find one that is a fixed amount, all the better.  Be sure that you only transfer over what you think that  you can pay off within the 0% interest period.

Pay off the balance.  The concept here is to transfer over and then begin to pay down the balance as quickly as possible.  In fact, your strategy should be to pay down the entire balance before the 0% interest period runs out.  This way, you will incur no additional interest fees on the balance.  And, if you are not able to pay it off completely, then your interest charges will be greatly reduced.

Refuse additional use.  Do not add to your balance by using this card for purchases.  Remember, you are trying to use a balance transfer card to help you reduce your debt, not increase it.

Exit strategy.  You are aiming for one way out:  pay off the balance.  But, if you are not able to accomplish this, then pay off as much as you can and then see if you can transfer again to another balance transfer card to complete the process.  Do not keep rolling over your balances endlessly, however, because eventually, you will not find any card issuers that will keep doing this for you.

Read about any changes in fees that come along with your statement.  This strategy works because it has been done in the past.  Now it is more difficult and requires you to stay on top of the details in making it happen.  If you choose to go with this strategy, it will serve you well and help you improve your credit card debt, not make it worse.

This entry was posted on Wednesday, May 20th, 2009 at 11:31 am and is filed under Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.