Finance Tips

0% balance transfer credit cards are a type of interest free credit card which allow you to pay zero interest on your debt for a fixed period of time, meaning it can be a cheap way to pay off debts if you can navigate the system to your benefit. However, while these credit cards can be very useful in certain circumstances, if you’re not careful they could equally lose you money. Here are the dos and don’ts of 0% balance transfer cards.

DO: Compare offers

Different providers offer different terms on their 0% balance transfer credit cards. Shop around for longer interest free repayment periods, lower interest rates once the offer is over and lower transfer fees where possible. It might not seem important right now, since you will not be paying any interest at first, but these factors could save you hundreds of pounds later on if you find yourself unable to pay off the balance within the promotional interest free period.

DON’T: Ignore transfer fees

Transfer fees are now standard on the majority of 0% balance transfer cards. This is because providers want to avoid customers taking up the interest free offer, failing to pay off their debt within the promotional and simply switching card supplier each time the interest free offer expires. Balance transfer fees vary from card to card but are usually around 2.5% to 3% of the total balance owed. Look for the lowest balance transfer fees possible when comparing credit cards.

DO: Be realistic

Be completely honest with yourself about how long it will take you to pay off your debt. If you know you can realistically pay it off within the interest free period, it could well be a good idea. If you’re not sure then you need to be wary of 0% balance transfer credit cards – leaving your debt for longer than the interest free period could costs you high interest repayments, the average interest on credit cards being around 17.5% in the UK. If you run out of time and choose to move your debt, meanwhile, you may be met with the alternative cost of the card’s transfer fee. If you don’t really know how long it will take to pay off your debts, a lifetime balance credit card might be more appropriate.

DON’T: Make purchases

Unless your 0% balance transfer credit card terms specify that the card is 0% on purchases, the likelihood is that you will have to pay very high interest on any purchases you make with the card. Even if the card does specify ’0% on purchases’, many customers don’t fully understand the conditions attached to this. Certain purchases could still carry high interest rates, as could instant cash transactions, such as cash withdrawals, so people often inadvertently trigger these expenses simply due to not understanding the terms and conditions attached. Also, making any purchases will increase the overall debt and make it harder to pay off the balance before the end of the promotional interest free period.

Students are often prone to fall under huge credit card debts due to some common mistakes done with credit cards for students. Below are some of the common mistakes that students usually make with their student credit cards.

Students make many mistakes while choosing student credit card. For instance:

Instant sign up for the first card offer:

This is the most common mistake that most students tend to commit. As they step into college, they get many credit card offers from numerous credit firms. If you are not serious about this and just sign up for the first credit card offer, chances are more to lose those good offers coming after a while. Thus, wait and look out for some reasonable offers.

Often, students are attracted by a card offers that offer goodies such as t-shirts, video games, and DVDs. Always try to avoid committing this mistake. You need to understand that these goodies are just promotional offers that hardly ever resist. Hence, always sign up after comparing and reading the terms and conditions of at least three or four credit card companies thoroughly.

Using Beyond the Credit Limit:

This is another common mistake. Often, these credit cards come with a huge credit limit, but this does not imply to spend your entire credit limit. It is important to keep the credit card balances always below 50% of the total credit limit. If you make use of the entire credit limit on expenditures, it may reflect on your credit report. In addition, you will have a tough time to pay off your balances on time, if you get into the habit of spending your entire limit.

Irregularity in Monthly Installment:

This is one biggest mistake, which students do with these credit cards. They ignore their monthly installments or skip them. In such cases, credit firms either increase the APR (Annual Percentage Rate), or charge some penalty fees or withdraw all your rewards and exclusive rights. To worsen, they may even decrease your credit limit. Incurred dues are the common cause of debts due to these credit cards.

Solution:

To avoid these mistakes, do not just read the special features of these credit cards. Spend a little time in reading the terms and conditions found in the respective web site of credit card companies providing these types of credit cards. This way, you can come to know all the charges and interest rates accurately.

Ascertain those web sites that offer reviews on various credit cards for students. These web sites collect all college credit cards available in the market along with their exclusive features.

If you find difficulty in choosing a best student credit card, seek help of financial consultants, as they may give you an informed opinion about the best one available in the market.

Having a student credit card is the first and vital step to build a strong credit history for a student. You need to make an excellent good credit report, since this helps to make a good impression after graduating. Hence, remember your responsibilities and avoid making such common mistakes.

Finding a credit card that offers no fee balance transfer is not as easy as it once was. Two years ago, more than a dozen credit cards offered these deals. At the time of writing, only two credit card companies offer no fee balance transfers. Altogether, they offer only three credit cards.

If you are unfamiliar with balance transfers, let me begin by explaining the fee structure. With most offers, credit card companies charge three percent up to a maximum of seventy five dollars for every balance you transfer. (Some companies have even eliminated the maximum fee or raised it to as much as two hundred and fifty dollars.) For the purpose of this article, we’ll work with the average balance transfer card. Below are three balance transfer situations that illustrate the costliness of transfer fees.

Situation #1: You have three credit cards, each with a twenty five hundred dollar balance. Each balance you transfer will cost you three percent of twenty five hundred dollars, or seventy five dollars. This will bring your total fees to two hundred and twenty five dollars. While this is still substantially less than the one thousand or more you would pay in interest, it does reduce your savings by twenty five percent.

Situation #2: You have a balance of five thousand dollars on one card and twenty five hundred dollars on another. Each transfer will cost you seventy five dollars in fees, bringing your total balance transfer expense to one hundred and fifty dollars. While this is a slight savings from Situation #1, you still lose a decent portion of your overall savings.

Situation #3: You have one credit card with a balance of seventy five hundred dollars. Because of the seventy five dollar maximum, your total fee will only be seventy five dollars, or one percent of the amount you transfer. This does help reduce you balance transfer fees to a reasonable level. However, why not avoid the fees altogether.

The way to avoid the seventy five to two hundred and twenty five dollars in fees you would incur when transferring a balance, opt for a zero percent interest credit card that offers no fee balance transfers. As their name implies, this type of credit card will save you on the annoying fees attached to most balance transfer offers.

There are a few things one must keep in mind about no fee balance transfers. First of all, most of these offers only provide a zero percent interest rate on balance transfers, not on purchases. Thus, if you apply for one of these cards, be sure to avoid making new charges on it. Secondly, be sure to make your transfers when you apply, as most no fee balance transfers require you to transfer your balances when you submit your online application. Lastly, since you are not paying interest for a full year, don’t feel rushed to pay off your credit card. Stash your money in a high yield savings account and earn interest on your money until the zero percent interest rate is about to expire. This way, you not only save a few hundred or a few thousand with your 0% balance transfer, you can also earn another four to five percent on your money.