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Do you plan to make 2016 the year you get out of debt — for good? Does your plan involve transferring balances to a lower interest credit card? There are lots of offers available right now for 0% interest for up to 18 months. But many people who transfer their debt to a lower interest card make a big mistake and wind up in worse debt than they were before the balance transfer.
Let CreditShout.com help. Follow these tips and tricks so you don’t make these balance transfer mistakes in 2016.
Our Top Balance Transfer Tips and Tricks
1. Don’t settle for the first offer that comes along.
You should shop around for the best deals. If you do, you will find that balance transfer deals vary widely. When shopping around, consider three factors when you choose the best card for a balance transfer:
– Balance transfer fees: This amount can be anywhere from 0% of the balance transfer up to 4% or more. Do the math to find out how much extra you’ll be paying to transfer your balance.
– Interest rate/APR: Zero percent interest on balance transfer offers are available. Shop around. Unless your credit isn’t good, don’t settle for less than zero percent. (Or should we say more?)
– Length of time for the introductory APR: When you select a credit card for a balance transfer, see how long the introductory APR (which is, hopefully, zero percent), lasts. How much can you afford to pay per month? Will you be able to pay off the card in full before the introductory APR expires? If not, how much will the interest rate rise to after that?
The way the credit card industry changes its standards and qualifications for people to get new credit, don’t count on definitely being able to get another balance transfer offer when your introductory APR expires.
2. Don’t miss a payment on your new card.
Sometimes it’s hard to remember to make a credit card payment on a new credit card the first few months. Don’t forget, or you’ll not only pay late fees of up to $49, but you may lose the low introductory APR offer.
Schedule automatic payments when you first receive the card, if possible, or schedule a reminder in your online calendar or smartphone. Do whatever you have to in order to make your payments on time. Signing up for online bill pay and email reminders helps many people, as does signing up for a free online budget site like Mint.com.
3. Pick a payment date that’s best for your budget.
Many credit cards let you choose your own billing date — early in the month, mid-month, or late in the month. Consider your budget and your other bills and select the date that’s best for you. It may help to make your due date the same as it was for the card you’re transferring the balance from.
4. Don’t charge up your older credit card with the zero balance.
With the holidays coming, it may be tempting to use all that new, available credit to treat your family and friends to gifts you can’t afford. Whatever you do, don’t charge up your old credit card. This is the number one mistake people make when they do a balance transfer with the intention of getting out of debt.
Instead, think about what it will do to your credit score, (your debt-to-available credit ratio will rise, which will lower your FICO credit score), your monthly payments (now you’ll have two credit card bills to pay), and your overall financial picture.
I recommend that set aside money throughout the year to pay for additional holiday expenses.
5. Don’t “bounce” money back and forth using balance transfer offers.
If you find yourself bouncing the same debt back and forth, year after year, this could be a sign of big financial trouble. Consider credit counseling through the National Foundation for Credit Counseling to help get your finances under control once and for all in 2016.