You can use a balance transfer credit card to cut your monthly credit card payments dramatically. They are also a great way to pay off your credit card debt entirely. But the key to using balance transfer credit cards successfully is make 100% sure that you do not make any new purchases on your new balance transfer credit card, ever.
As soon as you have applied for your balance transfer credit card and it arrives, sign the back and put it in a safe place at home. Do not put it in your wallet. Do not put in your purse ‘just in case’. Put it in a drawer and forget about it.
Any new purchases made on your balance transfer credit card will not be covered by your balance transfer rate and may attract credit card interest at the full APR on the card. Some balance transfer credit cards also offer a 0% interest rate on new purchases but these are normally for a shorter time period than the balance transfer offer.
The problem with this is that credit card companies have an ‘order of payments’. Your monthly payment will be used in the following order; firstly, any balance transfers you made, secondly, any normal transactions, and finally, any cash advances you took.
This means that if you move £3,000 onto a balance transfer credit card and then decide to use it to buy that £1,000 new HD TV and DVD system you will have to pay off the £3,000 balance transfer before you start on the £1,000 of new spending. As the £1,000 will be attracting the full rate of interest long before you have paid off the £3,000 the benefit of your balance transfer has been lost.
Don’t spend on your balance transfer credit card. If you need to make new purchases on a credit card get a card just for that purpose.
