Hi, my name is Joshua Rodriguez. Throughout the past several years, I’ve helped hundreds of consumers to become debt free and achieve financial stability. With that said, I’d like to let you know first and foremost that balance transfer credit cards are not a one size fits all option. When it comes to personal finance, there is no such thing as a one size fits all option in any category! However, for some consumers, balance transfer credit cards may just be their best option to manage their credit card debts. So, before I get into how balance transfer credit cards can help you manage your debts, let’s make sure that this is a good option for you. Keep the following factors in mind when considering balance transfer credit cards as an option:
You Must Have Good To Excellent Credit Scores – The truth is, balance transfer credit cards are designed as a promotional tool that brings new, thriving business to the lender. To qualify for any balance transfer credit cards that are worth applying for, you must have good to excellent credit scores. If not, you may want to consider other options.
Your Debt To Income Ratio Plays A Huge Role – Even if your credit score qualifies you for a balance transfer credit card, you are not out of the woods yet. Lenders only feel comfortable lending you the amount of money that they feel you can pay back. Therefore, the prime candidate for this option has credit card balances that amount to less than 10% of their annual income. If your credit card and signature loan debts amount to more than 10% of your income, you may want to consider other options.
NOT An Option For Those Facing Financial Hardships – If you are going through a financial hardship, the truth is, balance transfer credit cards will only prolong the inevitable. In situations of overwhelming credit card debt, I would strongly consider speaking with your lenders about hardship programs. These programs will do less damage to your credit scores than consolidation and settlement while providing a long term stable solution directly through your lender! To learn more about credit card hardship programs, please read, “Understanding And Applying For Credit Card Hardship Programs”.
Still Considering Balance Transfer Credit Cards?
If you have read my tips above, thought about it and still think that balance transfer credit cards are an option for you, you may just be the prime candidate for this option! You may be able to use them to consolidate multiple debts into one easy to manage account or to simply lower the interest rate on one credit card. Now, it all boils down to doing a proper comparison of your current lenders and the offers out there and making sure you keep your new card in good standings. Here are a few things that should help:
Step By Step Guide To Comparing Balance Transfer Credit Cards
Step #1: Make A List Of Appealing Offers: Comb online for the different balance transfer credit cards out there. As you do, you will find that some pop out more than others. Make a list of 5 to 10 of the most appealing offers you find. This will be the list of cards that yo compare!
Step #2: Compare Interest Rates: The first interest rate that will catch your attention is most likely going to be the promotional interest rate. Many balance transfer credit cards come with 0% rates that will last anywhere from 6 to 18 months. However, there are much more important rates to pay attention to! There are 4 different types of interest rates that you will find yourself paying on balance transfer credit cards and you should compare them all. Here is a list of the 4 different types of interest rates and the portions of your balance they will be applied to:
Promotional Interest Rates – These are low, short term interest rate that will last the length of the promotional period. In most cases, promotional periods will range from 6 to 18 months and the time varies by card. The promotional interest rates may apply to the entire balance or a portion of it depending on the promotion for the credit card you apply for. Make sure to read the fine print to get a thorough understanding of your promotional interest rate.
Standard Interest Rate – The standard interest rate is often times referred to as the purchase rate. This is because it applies to all all balances accumulated through standard purchases. Gas stations, grocery stores, restaurants or any other purchase in which a product or service is exchange for the use of your credit card are all examples of standard purchases.
Cash Advance Interest Rate – The cash advance interest rate is one that catches many people a bit too late. This interest rate is usually a few percentage points higher than the standard interest rate and will be charged to balances from cash transactions. Cash transactions include wire money transfers, cash back at a store or any other transfer of money using your credit card without the purchase of a product or service.
Default Interest Rate – Finally, the default interest rate is also known as the penalty interest rate. It is the rate of interest that you will have to pay on all balances should you make a late payment, spend more than your minimum payment or otherwise default on your agreement with your lender. This is generally the highest interest rate that you will pay on any credit card!
Step #3: Compare Other Fees: As with all other credit cards, balance transfer credit cards each come with their own unique set of fees that will be charged to consumers that decide to use them. These fees include annual fees, balance transfer fess, foreign transaction fees, late payment fees and more! Before you apply for any credit card, you should always read the rates and fees section of the terms and conditions to get a full understanding of any fees you may find yourself paying.
Step #4: Compare Lenders: As with in any industry, there are good lenders to work with and bad ones! When it comes to the credit card industry, this factor is more important now than ever. Your new balance transfer credit card may hold the key to your future financial stability. When you open that card, you will be starting a mutually beneficial financial relationship. You want to make sure that the other party in the relationship is one that you know and trust! If you don’t know much about the lenders that provide the cards you are comparing, do a bit of research before applying for the cards.
Step #5: Compare Rewards: Finally, just about all credit cards come with rewards these days. This holds true with balance transfer credit cards as well! With that said, to make sure you get the most bang for your buck, compare the different rewards programs if you come to a close tie. Free airfare is always a good tiebreaker!
Tips To Help You Keep Your Balance Transfer Credit Card In Good Standings
Tip #1: Never Make On-Time Payments: I know, your eyes probably just opened pretty wide. You may have read that twice just to make sure you read it right. Well, you did! I’m not telling you to make your payments late but, you shouldn’t make them on-time either. It is best to get in the habit of sending your payments at least 2 weeks in advance. Getting in the habit of paying bills right on time leaves you open to becoming late on your bills due to last-minute emergencies!
Tip #2: Never Make Minimum Payments: Minimum payments are just that, they are the minimum amount of money that you r lender is willing to accept as a payment towards your credit card debts. However, it is not the maximum amount they will accept. To maintain your good credit scores and get out of debt faster, it’s best to send at least double your minimum payment. You will be amazed at how fast this will cut down your balance!