Why You Shouldn’t Do a Credit Card Balance Transfer

by A.D Paterson on 15/02/2011

Doing a credit card balance transfer is going to be the quickest way for you to get out of the hole that the recent financial meltdown has forced you into, right? Well, if you’ve ever seen the balance transfer adverts on TV then you may be thinking that this is the only realistic solution for you, after all, who wouldn’t want those extra few months interest free, but all is not what it appears to be.

While it’s true that you’re going to get a few extra months to pay off the balance that you’ve transferred, and that may be enough for most people, the majority of the people who do a credit card balance transfer do so because they aren’t going to be able to pay off that money in time.

Still, it saves you money, right? Possibly; it really all depends on whether you have any outstanding balances on the card you’ve transferred the debt over to. If you have money outstanding on that card already then any payments you make are going to go towards that first. The same thing applies if you use the card while you have a balance transfer outstanding on the card, too.

If you’re anything like me you saw the ads on the TV and decided that if you have to pay the money anyway, you may as well get the interest knocked off of it at the same time, well, for a few months anyway. The problem was that the statements were coming through and the credit card with the balance transfer on it didn’t seem to be going down – that was worrying.

Having contacted the card company I discovered that only a small part of what I was paying them was clearing the transfer, the rest was paying off the debt already on there, plus, of course, they always take their interest payments before using the rest to clear any of the money you’ve actually put on the card.

Are the companies telling us anything that isn’t true in their adverts? Well no, they just aren’t making it completely clear, not unless you have a really large TV and watch the fine print on the bottom of the screen. You see, after the balance transfer interest free period ends you start paying the full rate of interest on the debt anyway. In most cases, unless the card was already clear, you won’t even have made a dent in the money you need to repay.

Are there outstanding deals that will let you take advantage of the offers you see on the TV? Yes, if you ‘play the game’ correctly. With the right help you can make it worthwhile to do a credit card balance transfer.

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{ 8 comments… read them below or add one }

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