At first glance, many of the balance transfer offers sound too good to resist. There are the enticing offers of 0% balance transfers and even low rate balance transfers for the life of the balance. There is a downside though.

With a credit card you only need to pay the minimum balance every month. By doing this there is no way you will clear your existing debt any time soon. You many also use the credit card for new purchases. Keep in mind that the interest rate for any new purchases is likely to be a variable rate and usually much higher. Also, any money you pay off your card will be paid off your existing balance transfer debt first, whilst your new purchases will be accumulating and attracting a higher rate of interest.

In my opinion, a balance transfer credit card should be used only to clear debt and not be used for making new purchases. You should also plan to pay off more than the minimum monthly payment. If you have the discipline to stick to this, then a balance transfer offer will probably be your best choice.

If you need to reduce any further temptation of getting into debt with a new credit card, then the best option for you would be a personal loan. A personal loan offers you a fixed rate of interest over a period of time and is probably the more sensible and less expensive option to clearing your existing debt.

For more information on balance transfers and reducing credit card debt check out our earlier articles:

Balance Transfers – know what you’re getting into!

Managing Credit Card Debt

There are certain things you need to be aware of to avoid some of the pitfalls.

Winning ways with your credit card
Pay off your balance in full – If you can, always pay off your balance in full each month. This way you will avoid all interest charges.

Use a Reward Credit Card – If you can pay off your balance in full and avoid paying in interest on your spending then you are in a great position to benefit from a rewards credit card. Reward credit cards offer all types of rewards which will definitely put you ahead of the game.

Consolidate your debts with a good balance transfer offer – If you combine your credit card balances into one, making use of a balance transfer, you will avoid interest on your debt for up to 12 months. This will give you a good deal of time to getting the debt cleared without paying interest.

Ways to avoid being a credit card loser

Paying Minimum Payment Only – If you regularly only pay the minimum montly repayments, you will be paying a high amount of interest on your purchases. This is probably one of the most important tips to avoid extra changes.

Avoid Spending on your Balance Transfer Cards – If you have consolidated your debts into a balance transfer card, then you should not use this credit card for spending. All your repayments will go towards clearing the balance transfer debt first. This means that any new purchases will be charge at regular interest rate. Any new purchases will start to accumulate and interest charged at a much higher rate. If you do transfer your balances, make sure you have a good low rate credit card for your everyday purchases.

Avoid Unnecessary Fees – Even if you don’t pay off your balance in full each month, make sure that you at least make your payment on time. This will ensure you are not changed a late payment fee. Be aware of your credit limit. Try not to exceed your limit or you may be charged an extra fee also.

Everyday Spending – Try to only use your credit card for expenses that you know you can afford. Many consumers use credit cards as a ways to live from payday to payday and never catch up. Try to avoid spending beyond your means.

By following these simple steps, we can learn how to use our credit cards wisely. We can avoid unnecessary charges and hopefully avoid becoming a victim of credit card debt.

• Check the balance transfer duration
  Most balance transfer offers last for 6 to 12 months, then revert back to the standard variable interest rate. Usually this rate is around 17 percent or higher. Make sure you are clear on what the current rate is to give you some idea as to what you will pay when the offer expires.
• Look out for hidden fees
  Some credit cards charge a fee for transferring balances. It is usually under 5 percent, and many have a limit of $25 to $50. Be sure to make enquiries to find out if any transfer fees apply.
• What does the 0% or low percent balance transfer rate cover?
  Many credit cards offer the balance transfer rates exclusively for balances transferred from other credit cards. What most people forget is that any new purchases will be charged at a higher interest rate. And most importantly, any payments recieved will first be applied to the transferred debt, meaning that any new purchases will be charged at a much higher rate and will continue to accrue interest. It is wise to apply for a balance transfer offer and have another low fee credit card to use for everyday purchases.
• Never miss a payment
  Avoid missing payments as this can cause your balance to revert to a higher interest rate. Make sure you are fully aware of the terms and conditions for late payments before you sign up.

As you can see, Balance transfer offers have a few hidden traps to be aware of. However, if you understand all the pitfalls and avoid them, then a good balance transfer credit card can help save you loads of money.