Knocking out high interest with good credit card deals
Every day you open up your mailbox and pull out junk mail. Chances are one of those pieces of mail is going to come from a credit card company offering you a 0% balance transfer interest rate. It sounds like a great credit card deal, right? But why do you see so many of these? What is the catch? Is there a catch?
There is always some kind of catch. We live in a world where you have to be sure to read the fine print or get a kick in the behind for your lack of attention. A credit card deal that sounds too good to be true probably is. Credit card companies are making plenty of money from 0% interest rates; the trick is for you to avoid the finance charges. That is where the credit card company will get you.
But with the right smarts, you can take advantage of these balance transfer credit card deals and make them work out for you without having to pay a price for it. You can use two credit cards to cram in all the advantages and come out on top. First, however, you need to be aware of how some of these cards work.
When a credit card company offers you a balance transfer at 0%, they usually mean it. You move over one balance (or more if you want) to their card and do not have to pay any interest on it. If you make any new purchases, then you just get charged the regular APR (annual percentage rate) that card has. Here’s where the trick comes in.
When you make a payment on your card, that payment will initially go to the amount that has the low interest rate – in this case, the balance you transferred over. For example, say you transferred $1,000 over to the card and later made a purchase of $60.
When your bill arrives, you pay $100, thinking you’ll take care of both that purchase and the balance transfer, when in fact you will simply be paying off the balance transfer amount and not the $60. In order to pay for that $60, you will first have to pay off the entire balance, so while your balance is not building up any interest, your purchases are.
Sneaky, sneaky. So what can you do about it? Well, you can get the balance transfer credit card, move an amount there, and simply not make any purchases with that card. Just pay off the amount while taking advantage of the 0% offer and using a different credit card to make purchases. After all, you will more than likely need a credit card for purchasing power, even if just in emergencies.
The card you want for purchases should be a great credit card deal, so do a lot of shopping around before making a solid choice. You will want a credit card that can either offer you a low APR or some kind of reward card. If you are really lucky, you might find top credit card deal that gives you both, but try not to get ahead of yourself, as that is rather unlikely.
First find a good 0% APR balance transfer card. Depending upon the amount you plan to put on that card, find out how long the 0% period will last, as these cards do not give you an infinite amount of time to use the 0% APR. Some might require you to make new purchases, so do everything you can to avoid these cards, or find one that has a very small amount.
Formulate a plan. You want to be able to pay off the card within the allotted time frame for the 0% APR. Once you have your plan, stick to it. This will get you free from money you owe while you use your newer and better credit card to make any new purchases you need.
Your new credit card should be one with a low APR or one that can offer you a decent rewards program. Do whatever you can to pay off your balance every month so you do not end up carrying over more money than you need and ending up with another large balance that would do well with 0% - but you are already dealing with that, so your goal is to keep the amount you owe at a minimum. This is a plan to help you get out of debt, not a way to ring up more.
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