Money cannot buy happiness, but it can buy comfort and it can make our lives more pleasurable in many ways. Maybe you want to treat your Mother to an extended, spontaneous trip. Maybe you’d like to attend three festivals this year rather than one. Or maybe you’d like to go the extra mile for that new lover by treating them to a few theatre shows and expensive, five-star dinners overlooking the city.
We all know this comes with a price. A balance will be stored on your card, which is understood, but sometimes there is a lot of extra baggage attached. This is called interest, and sometimes it can be pretty hefty. Sometimes APR’s (annual percentage rate) can reach as high as 20.99 percent. Let’s say you’ve spent around $2,000, which means you’ve got an extra $400 or so to pay on top!
Fortunately, if you find yourself getting in to a pickle such as this, there are cheaper ways out of it.
There are ways of transferring your balance from your existing card onto another card. This is called a balance transfer. Some balance transfer offers have APR’S attached, while other balance transfer offers are APR free. That’s 0% APR, but only for a limited amount of time. Some offers even include zero balance transfer fees.
Here are some factors to consider:
- Many balance transfer offers include a 0% APR for a limited time. , There are a number of offers with a 0% APR for a limited time – the amount of time is usually between nine and sixteen months.
- Balance transfer fees can apply. As well as fee-free offers, almost all balance transfer offers charge a fee between 3% to 5% when making the transfer. If you have a $10,000 balance, you would have to pay $300 to $500 up front. If you are saving on interest, however, that fee can pay for its self.
- Balance transfer offers are not all created equal. Terms and conditions of balance transfer offers can be similar, but they are not totally consistent with each other. For example, the length of the 0% APR promotional period varies greatly between offers. When you are in debt, there is a big difference between having 0% APR for six months and 0% APR for 18 months.
- Many of the best balance transfer offers were only available to those with good credit. Since balance transfer offers usually offer excellent terms, they are almost always available to individuals with excellent, or at least good, credit.
As soon as you have found a balance transfer offer that has 0% APR and is fee-free, it is very important to act fast, or else your credit could keep getting higher which puts you at risk of gaining a record of bad credit; making you less susceptible to being granted a good balance transfer deal.
There are many ways of doing this. Here are a few to help get you started:
1) Where ever possible, stick to cash rather than credit. If you are trying to pay off a credit card balance, using more credit can make that very hard. It is important to use the alternative; which is cash. Even better, you can abandon credit all together and just stick to cash.
2) There is no harm in being a bit crafty. If you’ve got yourself the 0% APR rate for 14 months, and let’s say you’re balance is $2,000, then simply divide that some by 14, then you could pay a monthly payment of $150 for 13 months and then the remaining balance can be paid last minute.
Is it right for you?
If you have decent credit, and think that you’re paying an unreasonably high interest rate, then balance transfer is for you. Mostly, the process is hassle free, allowing you to transfer the balance from your high interest card to one with more reasonable terms and lower interest. All you’ve usually got to do is fill out an application.
It’s well worth the minmal effort and you can save a huge amount. Let’s say you have a $10,000 balance with a 15% APR. You will pay around $1,500 per year in interest alone. The right balance transfer offer could turn that figure in to zero. And if you’re able to pay your debt down altogether during that time, you could save a lot of money and become debt-free all in one go.
[Read: Credit Card or Cash]
It’s simple really. All you have to do is to remember to count in any applicable balance transfer fees before the word go. And no matter what, you should also take the time to read through all of your new card’s fine print, terms, and conditions. The savings may still be substantial, but it is important to make an informed decision.