Balance Transfer Checks- Opportunities to Save

Balance Transfer Checks- Opportunities to Save
by: Debbie Dragon

Tis' the season for credit card offers! In particular, it seems that
from November through February marks an increase in marketing from
credit cards you already have- particularly if you haven't been using
them in awhile. Credit card companies spend quite a bit of money on
marketing to attract new customers-and it's always cheaper to keep
customers they have rather than trying to find new customers.

What you may find waiting for you in your mailbox is a balance
transfer offer from one of the credit cards you already have. The very
best balance transfer offers are in the form of checks that offer 0%
interest, but there are a number of other offers you might receive
with 3.99% interest or 6% interest and no balance transfer fees. All
of these offers may actually offer you a good deal depending on what
you decide to do with them.

For example, if you were to use a balance transfer check with 3.99%
interest and a fee of 3% of your total amount to pay off a credit card
or loan with 11% interest- as long as the dollar amount you borow from
the balance transfer check is high enough, you're going to be saving
enough money to make that a worthwhile fee to pay. You'll also be able
to pay off the balance much sooner with the lower interest rate even
by making the same amount of payments each month- since more of your
payment goes to principal

What many people don't realize is that they can actually get a balance
transfer check from one of these low or no interest offers, and
deposit the check into their own, personal checking accounts. Once
you've deposited the money, you can use it to pay off a variety of
debts that you owe that are costing you more than 3.99% interest (or
whatever the interest rate is on the balance transfer check offer
you've received); and save quite a bit of money!

There have been people who purchase cars using a balance transfer
check offer. If you're lucky enough to receive an offer for 0%
interest on the life of the balance transferred (with checks); you can
buy and pay for a car without any cash up front and without paying any
interest. How great is that?!

Other uses for the low or no interest balance transfer check offers: a
buy now, pay later holiday shopping season! If you deposit the check
from the balance transfer offer into your own account, you could use
that money to finance your holiday shopping. This is a good idea if
you get a 0% interest offer; or if you were planning to use a higher
interest credit card to make your purchases. By using the balance
transfer checks in your own checking account, you save on interest and
have more time to pay for the purchases which means you aren't hurting
your wallet too much.

Home improvement is another good candidate for using balance transfer
checks. Once again, just deposit the balance transfer check that you
write to yourself into your own account, and then hit the home
improvement store for the items you need to make the repairs or
complete your latest project.

As long as you make your monthly payments on time, you'll be able to
keep your 0% or low interest offer on the balance transfer. Making
even one payment late can be grounds for a rate increase, as well as
late fees, and the financial gains of using the offer will be wiped
out!

Avoid These Common Credit Card Balance Transfer Mistakes

Avoid These Common Credit Card Balance Transfer Mistakes
That offer to transfer your credit card balances sounds like a pretty
good deal, doesn't it? And it is, until you take out your magnifying
glass and start reading all the fine print that goes along with the
offer. What a lot of people don't realize is that the lender making
such an unbelievable offer wouldn't be doing so if there wasn't some
way to benefit financially. These lenders actually feel safe in
assuming that most people transferring balances won't pay attention to
the potentially costly details that accompany the offer.

Transferring balances from a high-interest rate credit card to one
with no or a lower interest rate can save you a substantial amount of
money if you don't fall victim to these common mistakes.

1. Balance transfer fees

Rare is the balance transfer offer that doesn't come with some sort of
balance transfer fee. It might be a flat rate like $50 or $75 but it's
usually a percentage of the total amount of each balance transferred.
Maybe 3% doesn't sound like much but if you're transferring several
thousands of dollars, that fee can be hundreds of dollars!

Although you may know by now to look for such fees, there's something
else you need to look for: whether or not there's a cap on how high
the balance transfer fee can go. Avoid those without caps. Before
taking advantage of an offer, always do the math. If the balance
transfer fee ends up being more than you would have paid in interest
had you not done the transfer, then don't transfer!

2. Other interest rates

While there might be low or no interest on balance transfers, you're
still getting a new credit card which means you'll still be able to
use it to make purchases. Purchases though, normally aren't part of
the no or low interest deal. In fact, you can expect the interest rate
on purchases or cash advances to be just as high as or higher than the
credit cards you're already using to make purchases. If you're serious
about chipping away at your debt, which is really the best reason to
take advantage of balance transfer offers, then you really should stop
accruing credit card debt!

3. Payment allocation

If you do transfer balances to the new account, and you do make
purchases on this new credit account, you may be surprised to find
that your payments are not allocated the way you thought (assumed)
they would be. Say you transferred $1,000 and during the last month
you made new purchases totaling $200. You make a payment of $300
thinking you'll clear away the new charges and start chipping away at
the balance transfer amount.

Next billing cycle you get your statement and find that the $200 in
new purchases is still there – plus the couple of new charges you made
since then. And all those purchases are compounding interest at a rate
of 16, 19, 22% or more! What happened? Well, as stated in the fine
print, the credit card company allocated your entire payment to the
zero interest balance because – well it's not making any money on that
amount. But it certainly is on those new purchases!

4. Interest rate after intro rate expires

That low or zero interest rate won't last forever and you need to know
how much it'll increase when the stated period expires. That's because
any balance remaining afterwards is likely to be whacked with a much
higher rate. To keep this from happening – which negates any savings
benefits you've reaped so far – make sure you have a plan for paying
off whatever balance you transfer before the rate increases. Also make
sure you don't miss a payment or make payments late. If you do you
might find – without warning – that your zero percent no longer
applies and you're paying more in interest than you were before.

Balance Transfer Checks- Opportunities to Save

Balance Transfer Checks- Opportunities to Save
by: Debbie Dragon

Tis' the season for credit card offers! In particular, it seems that
from November through February marks an increase in marketing from
credit cards you already have- particularly if you haven't been using
them in awhile. Credit card companies spend quite a bit of money on
marketing to attract new customers-and it's always cheaper to keep
customers they have rather than trying to find new customers.

What you may find waiting for you in your mailbox is a balance
transfer offer from one of the credit cards you already have. The very
best balance transfer offers are in the form of checks that offer 0%
interest, but there are a number of other offers you might receive
with 3.99% interest or 6% interest and no balance transfer fees. All
of these offers may actually offer you a good deal depending on what
you decide to do with them.

For example, if you were to use a balance transfer check with 3.99%
interest and a fee of 3% of your total amount to pay off a credit card
or loan with 11% interest- as long as the dollar amount you borow from
the balance transfer check is high enough, you're going to be saving
enough money to make that a worthwhile fee to pay. You'll also be able
to pay off the balance much sooner with the lower interest rate even
by making the same amount of payments each month- since more of your
payment goes to principal

What many people don't realize is that they can actually get a balance
transfer check from one of these low or no interest offers, and
deposit the check into their own, personal checking accounts. Once
you've deposited the money, you can use it to pay off a variety of
debts that you owe that are costing you more than 3.99% interest (or
whatever the interest rate is on the balance transfer check offer
you've received); and save quite a bit of money!

There have been people who purchase cars using a balance transfer
check offer. If you're lucky enough to receive an offer for 0%
interest on the life of the balance transferred (with checks); you can
buy and pay for a car without any cash up front and without paying any
interest. How great is that?!

Other uses for the low or no interest balance transfer check offers: a
buy now, pay later holiday shopping season! If you deposit the check
from the balance transfer offer into your own account, you could use
that money to finance your holiday shopping. This is a good idea if
you get a 0% interest offer; or if you were planning to use a higher
interest credit card to make your purchases. By using the balance
transfer checks in your own checking account, you save on interest and
have more time to pay for the purchases which means you aren't hurting
your wallet too much.

Home improvement is another good candidate for using balance transfer
checks. Once again, just deposit the balance transfer check that you
write to yourself into your own account, and then hit the home
improvement store for the items you need to make the repairs or
complete your latest project.

As long as you make your monthly payments on time, you'll be able to
keep your 0% or low interest offer on the balance transfer. Making
even one payment late can be grounds for a rate increase, as well as
late fees, and the financial gains of using the offer will be wiped
out!

Avoid These Common Credit Card Balance Transfer Mistakes

Avoid These Common Credit Card Balance Transfer Mistakes
That offer to transfer your credit card balances sounds like a pretty
good deal, doesn't it? And it is, until you take out your magnifying
glass and start reading all the fine print that goes along with the
offer. What a lot of people don't realize is that the lender making
such an unbelievable offer wouldn't be doing so if there wasn't some
way to benefit financially. These lenders actually feel safe in
assuming that most people transferring balances won't pay attention to
the potentially costly details that accompany the offer.

Transferring balances from a high-interest rate credit card to one
with no or a lower interest rate can save you a substantial amount of
money if you don't fall victim to these common mistakes.

1. Balance transfer fees

Rare is the balance transfer offer that doesn't come with some sort of
balance transfer fee. It might be a flat rate like $50 or $75 but it's
usually a percentage of the total amount of each balance transferred.
Maybe 3% doesn't sound like much but if you're transferring several
thousands of dollars, that fee can be hundreds of dollars!

Although you may know by now to look for such fees, there's something
else you need to look for: whether or not there's a cap on how high
the balance transfer fee can go. Avoid those without caps. Before
taking advantage of an offer, always do the math. If the balance
transfer fee ends up being more than you would have paid in interest
had you not done the transfer, then don't transfer!

2. Other interest rates

While there might be low or no interest on balance transfers, you're
still getting a new credit card which means you'll still be able to
use it to make purchases. Purchases though, normally aren't part of
the no or low interest deal. In fact, you can expect the interest rate
on purchases or cash advances to be just as high as or higher than the
credit cards you're already using to make purchases. If you're serious
about chipping away at your debt, which is really the best reason to
take advantage of balance transfer offers, then you really should stop
accruing credit card debt!

3. Payment allocation

If you do transfer balances to the new account, and you do make
purchases on this new credit account, you may be surprised to find
that your payments are not allocated the way you thought (assumed)
they would be. Say you transferred $1,000 and during the last month
you made new purchases totaling $200. You make a payment of $300
thinking you'll clear away the new charges and start chipping away at
the balance transfer amount.

Next billing cycle you get your statement and find that the $200 in
new purchases is still there – plus the couple of new charges you made
since then. And all those purchases are compounding interest at a rate
of 16, 19, 22% or more! What happened? Well, as stated in the fine
print, the credit card company allocated your entire payment to the
zero interest balance because – well it's not making any money on that
amount. But it certainly is on those new purchases!

4. Interest rate after intro rate expires

That low or zero interest rate won't last forever and you need to know
how much it'll increase when the stated period expires. That's because
any balance remaining afterwards is likely to be whacked with a much
higher rate. To keep this from happening – which negates any savings
benefits you've reaped so far – make sure you have a plan for paying
off whatever balance you transfer before the rate increases. Also make
sure you don't miss a payment or make payments late. If you do you
might find – without warning – that your zero percent no longer
applies and you're paying more in interest than you were before.

Are 0% Balance Transfer Offers Really Free?

by: Debbie Dragon

Paying off credit card debt with 0% interest is a dream come true –
which is exactly why a large number of credit card companies offer the
promotions. They know it will attract new customers who have debt with
other credit card companies to transfer that debt to their cards. But
where is the value to the company offer the credit card balance
transfer offer; if they let you repay that debt with 0% interest?

Whenever you see credit card promotions that sound like they're going
to be a good deal for you, it's best to look into them closely and
make sure you read all of the "fine print". A 0% balance transfer is
typically good for a specific length of time, six months or twelve
months are the most common terms. If you have several thousand dollars
of debt on a higher interest credit card and take advantage of a 0%
balance transfer offer for twelve months, the credit card company is
betting on you still having a balance once the promotional period
ends. When the six or twelve months of no interest repayments end, the
balance will start being repaid with interest.

A common mistake many people make when transferring balances under the
six or twelve month 0% promotional offers, is not checking what the
interest rate will be after the promotion ends. If you're moving a
balance that you are currently paying 9% interest to a card with an
interest rate of 19% after the promotional period ends - unless you
are able to pay it off completely during the 0% interest period, you
are not likely to benefit financially over the long term. You would
have to start looking for another 0% balance transfer offer, or pay
the higher interest until the balance is paid off.

The other often overlooked factor of balance transfer offers with 0%
interest is that most of them charge a transfer fee. The fee can range
from 1% to 5% of the amount transferred. This fee can add up,
depending on how much money you are transferring. There are some
instances when the amount you pay for the balance transfer fee will
result in more money paid than if you had just kept your balance on
the card it was on and paid interest. To ensure you're actually
getting a good deal, you'll want to play with the numbers and
determine how much you'll spend for the life of the balance if you
keep it on the card it's currently on, or if you move it to the new
card with the 0% balance transfer offer, and don't forget to factor in
a transfer fee if you have to pay one, and what the interest rate will
be at the end of the promotional offer.

Interest free balance transfer offers are also only good as long as
you make your payments on time. This is important to keep in mind if
you sometimes have difficulty keeping up with your payments, because
if you send one a few days late you can lose your 0% interest rate and
start paying a much higher interest rate.

In order to make balance transfer fees work for you financially, it's
actually better to find a low interest balance transfer offer that is
fixed for the length of the balance. If you can transfer a few
thousand dollars from a credit card with 9% interest or higher, to a
card with 1.99% or 3.99% fixed interest on the balance transfer for
the life of that balance, you will save hundreds of dollars in
interest and actually make out better than the 0% offers (provided you
know you can't pay off the entire balance before the 0% offer ends).

Are 0% Balance Transfer Offers Really Free?

by: Debbie Dragon

Paying off credit card debt with 0% interest is a dream come true –
which is exactly why a large number of credit card companies offer the
promotions. They know it will attract new customers who have debt with
other credit card companies to transfer that debt to their cards. But
where is the value to the company offer the credit card balance
transfer offer; if they let you repay that debt with 0% interest?

Whenever you see credit card promotions that sound like they're going
to be a good deal for you, it's best to look into them closely and
make sure you read all of the "fine print". A 0% balance transfer is
typically good for a specific length of time, six months or twelve
months are the most common terms. If you have several thousand dollars
of debt on a higher interest credit card and take advantage of a 0%
balance transfer offer for twelve months, the credit card company is
betting on you still having a balance once the promotional period
ends. When the six or twelve months of no interest repayments end, the
balance will start being repaid with interest.

A common mistake many people make when transferring balances under the
six or twelve month 0% promotional offers, is not checking what the
interest rate will be after the promotion ends. If you're moving a
balance that you are currently paying 9% interest to a card with an
interest rate of 19% after the promotional period ends - unless you
are able to pay it off completely during the 0% interest period, you
are not likely to benefit financially over the long term. You would
have to start looking for another 0% balance transfer offer, or pay
the higher interest until the balance is paid off.

The other often overlooked factor of balance transfer offers with 0%
interest is that most of them charge a transfer fee. The fee can range
from 1% to 5% of the amount transferred. This fee can add up,
depending on how much money you are transferring. There are some
instances when the amount you pay for the balance transfer fee will
result in more money paid than if you had just kept your balance on
the card it was on and paid interest. To ensure you're actually
getting a good deal, you'll want to play with the numbers and
determine how much you'll spend for the life of the balance if you
keep it on the card it's currently on, or if you move it to the new
card with the 0% balance transfer offer, and don't forget to factor in
a transfer fee if you have to pay one, and what the interest rate will
be at the end of the promotional offer.

Interest free balance transfer offers are also only good as long as
you make your payments on time. This is important to keep in mind if
you sometimes have difficulty keeping up with your payments, because
if you send one a few days late you can lose your 0% interest rate and
start paying a much higher interest rate.

In order to make balance transfer fees work for you financially, it's
actually better to find a low interest balance transfer offer that is
fixed for the length of the balance. If you can transfer a few
thousand dollars from a credit card with 9% interest or higher, to a
card with 1.99% or 3.99% fixed interest on the balance transfer for
the life of that balance, you will save hundreds of dollars in
interest and actually make out better than the 0% offers (provided you
know you can't pay off the entire balance before the 0% offer ends).

How Balance Transfers Affect Your Credit Score

How Balance Transfers Affect Your Credit Score
by: Debbie Dragon

Transferring balances with high interest rates to a credit card with a
lower interest rate (or a 0% interest balance transfer offer) is a
great way to pay your debt off faster and save money in the process.
It's not as cut and dry as transferring the money from one place to
another though, there are some other considerations to work out before
you rush into the next balance transfer offer you qualify for:
primarily, how does a balance transfer affect your credit score?

Balance Transfers and Credit Scores – What's the Connection?

Due to the formula used to calculate an individual's credit score,
moving money from one credit card to another can actually cause some
negative issues with your credit score that you may not have even
realized.

Credit scores are calculated with a top-secret formula, but we do know
how much weight each component of our credit carries in the
calculation:

Payment History – 35%
Outstanding Debt – 30%
Established Credit – 15%
New Credit – 10%
Type of Credit - 10%

As you can see, the two biggest factors contributing to your credit
score calculation involve how well you make your payments and how much
debt you currently have. When considering balance transfers and how it
will affect your credit score, first you should realize that most
people mistakenly close out the old credit card once the balance has
been moved to the new card – this is bad because it lowers the average
age of your accounts and this accounts for 15% of your credit score.
If most of your credit is recent, and you close your old account(s) as
you transfer balances, you've suddenly decreased the average length of
time you've had credit and your credit score will decrease as a
result.

In addition, if you close out your old credit card account after
transferring the balance, you've lowered your debt to credit ratio,
which accounts for a whopping 30% of your credit score. Closing the
account gives you less credit available to you, which means you are
suddenly using more of your available credit even though you haven't
spent any more money.

It's also true that opening a credit card account – like the one you
want to transfer your higher interest balances to, will result in a
lower credit score. New accounts make up 10% of your FICO credit
score, so it's possible that opening the new account will take a hit
on your account, but since it's only 10% of your overall score
calculation, it shouldn't be as big of a factor as closing out the
older account.

If you transfer a balance to a new card, and leave the old card open –
it will actually appear as if you owe less money because you have a
higher available credit amount. You may experience a bit of a credit
score increase from this which can counteract the decrease from
opening a new account.

Goals for Balance Transfers

Your goal is to have less than 30% of your available credit (all cards
included) utilized. You should always look to transfer balances to
cards that give you the best rates, and leave your old accounts open.
In the meantime, don't charge any more money until your total balance
is well below the 30% utilization, and you'll soon see your credit
score affected positively for these responsible financial decisions.

In order to get a better understanding of where you stand with your
credit score, don't forget you're entitled to a free credit report
from each of the three credit reporting agencies annually. With the
report, you can see how much credit you're using, and whether or not
looking for a new balance transfer offer might help you raise your
score and save money on interest.