Credit card bills can stack up quickly leaving us with tons of never-ending compounding debt behind, that’s when a balance transfer can be used. It allows us to transfer our advances from a high-interest card to a lower one and helps consolidate our debts. A balance transfer can reduce your EMIs by transferring your existing personal loan at a lower interest rate. It can be a lucrative medium for individuals who have taken a loan but are struggling to repay it back. However, sometimes, this sheer pressure of surmounting bills can lead to some mistakes in balance transfer, and we may end up regretting our decision. So, to help you in this process, we have garnered a list of some of the common mistakes that people do in a balance transfer and how you can avoid them.
Not understanding the fine print
Don’t go for a balance transfer just by looking on to the main headlines or simply because one of your close relatives said so. Do your own research before applying for a balance transfer and look for the best offers. Many people in the hoard of reducing debt, forget to carry-out their own research and end up paying higher interest on their amount. There are many financial institutions providing low-interest rates on balance transfer. You should always compare the interest rates and then make the conclusive decision. You must understand the pros and cons of balance transfer before indulging into it.
Performing the balance transfer even when not needed
This is the most common mistake done while exploring the pathway to pay-off debt. The idea of switching from a high-interest card to a lower one may sound like a no-brainer, but most people seem to ignore the charge of 1-2% fee being levied on the balance transfer. You might end up paying more in light of consolidating your debt if you commit such mistakes in balance transfer.
That fee may be worth it if you need to take your time around paying your bills and want to move slowly, but if you’re just trying to spread out the cost of debts and pay them over-time then you really need to think about it.
Trying to transfer balance between two cards from the same company
Before starting out, it’s pivotal to keep in mind that banks will not do a balance transfer between two cards from the same company. This might be a little tricky one to grasp upon. But it is one of the most crucial information that you should know about. Many people unknowingly attempt to transfer the amount without giving it a thought. It’s a simple analogy if banks let their existing customer’s transfer balance between their own cards then they will be losing money on interest charges.
Adding more debt to your old card
We know the hard to resist the tempting feeling of purchasing new things, but if you do purchase something with your old card then you’re getting right back up at the position you started with. The amount you incur will again be charged with interest. The only difference being, this time you will have two outstanding payments at the end of every month. And you will be again surmounted by a huge pile of debt. Make sure you do not make such mistakes in balance transfer.
Defaulting/Making late payments
Making late payments or defaulting can be the worst mistake someone can make a balance transfer. We avoid late payments on our advances to maintain the health of our credit score. Late payments on a balance transfer can be detrimental too. If you miss out on your payments, you will be charged with double-digit interest rates. This will effectively reprimand the reason or motive for balance transfer in the first place. So, if you have been missing your EMI payments or negligent with your credit so far, you might face a problem. To qualify for a balance transfer, you need a good credit score. You can check your free credit report online and find out your credit score.
Not having a proper plan to pay-off debt
As famously quoted by Napoleon Hill “ Plan your work and work your plan”, planning comes-off as an easy part before an uncertain situation. You might neglect the importance of planning in advance, and may end up regretting your decision later. A low-interest rate can be a great opportunity for you to pay off debts. You can get rid off outstanding amount once and for all. It’s highly crucial to calculate the monthly payments that you will be paying and induce a proper plan before starting out.
Not understanding all the terms and conditions
We always tend to neglect the terms and conditions written at the bottom, consoling ourselves by ignoring their importance. Before doing a balance transfer, it’s imperative to go through the terms. Check for any unfavorable term that might get imposed later on. Or else you might end up seeing an unpleasant surprise, which may not be as favorable as you desired it to be.
We hope you will avoid making such mistakes in balance transfer. If used properly, a balance transfer can certainly help you get rid of surmounting debt. You can also save money and consolidate your holdings. Just make sure to be cautious in the process and avoid making the mistakes in balance transfer outlined above. You can surely benefit from balance transfer too.
