Balance transfer credit cards can help you get out of high-interest debt quickly and efficiently. You may have received offers for these types of cards if you are carrying debt currently. But do you have the information you need to make the best financial decision? AOL lists these balance transfer mistakes to avoid:
Applying without checking if you qualify
Every time you submit a credit card application, the lender notifies the credit bureaus and adds a hard inquiry to your credit file. Such inquiries remain on your credit report for two years and are calculated into your credit score…
That’s why, if possible, it’s important to prequalify for a balance transfer card before submitting the application. Prequalification gives your potential lender permission to run a soft credit check and determine your eligibility without affecting your credit score…
Assuming you can transfer all of your debt to one card
When transferring debt to a new balance transfer card, keep in mind you may not receive a high enough credit limit to wipe it out completely…
Each credit card issuer calculates your credit limit differently, so you may be approved for a credit limit on your new balance transfer card that’s lower than the debt you need to transfer… In some cases, issuers limit the amount you can transfer to a certain percentage of your total credit limit — often about 75 percent. Other issuers may cap the total amount of money you can transfer within a certain period of time, while some issuers may enforce limits on both…
Not having a payoff plan
Balance transfer cards can help you get out of debt quickly and cheaply. To do that, you need to have a payoff plan. Review your budget to determine how much you can dedicate to the debt payments on a monthly basis. Then grab a calculator to determine how long it will take you to pay off the debt. Try using our Credit Card Payoff Calculator for help…
Neglecting the fee in your analysis
Almost all balance transfer credit cards involve an initial balance transfer fee… The fee is usually worthwhile, but be sure it makes sense before making a decision because it will add to your overall debt balance. If you can make large payments and get out of debt on your own in a few months, a balance transfer credit card may not be the best option.
Using the card while you’re paying off the transferred balance
For balance transfer credit cards, the 0 percent intro APR applies to the debt you move over. In many cases, you’ll be charged the standard APR for purchases and an even higher cash advance APR if you take a withdrawal on the card. So if you assume you can enjoy the zero-interest period on everything, think again…
Use a different card for transactions until the debt on the balance transfer card is paid off. If you want to make partial payments, find out what the APR is on all your cards and use the one with the lowest rate.
You can read the full article here.
Eliminating debt is important. But there are a lot of factors to keep in mind when considering a balance transfer. Such a move would be just one aspect of your overall financial life, and can impact the big picture. So make sure you do your research before making a commitment.