No. 1 Mistake When Using Credit Cards for Balance Transfers
Posted on 19 March 2008 | Category: Balance Transfer, Citibank, credit card
Just a quick post from InsiderBanking.com just incase any of you are doing or about to do a Balance Transfer on a credit card.
You are probably doing it to get a low or zero percent deal. We are sure it makes sense but don’t mess it up by falling into this trap.
If you owe anything on your credit card before you do your Balance Transfer it is probably at a higher rate. If you do not clear the balance before you do you transfer then your low rate and old rate debt are both on the card.
When you make a payment you will find it is always the lowest rate deal will be paid first. You will be paying off first the deal that made sense and the higher rate debt will be growing steadily in the background. Untouched by your payments.
Make sure you clear that old debt first by paying it off even if you use a high interest loan first (you will only use it for a few days – and then pay it back with part of the Balance transfer- make sure you use a loan with no early payment penalty)
Once this is done then go ahead and do the Balance Transfer – making sure to pay off that short term loan you used.
Also don’t make mistake No. 2. If you have done a Balance Transfer, lose the card, hide the card, destroy the card. Whatever you need to do to make sure you do not spend on it. If you do that spend will inevitably be at a higher rate and again it will be behind your low interest rate deal and you will be paying that low rate off rather than that new spend which will be compounding at the higher rate.
If you have any sucesses or failures with this or have a comment or question please let us know – we can all learn from each other if we all become Insiders.