Paying Off Your Spend With A 0% Balance Transfer Card
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Paying Off Your Spend With A 0% Balance Transfer Card

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Okay, so Christmas is over and the silly season has ended. If your credit card statement is looking as bloated as you feel, then it could be time to think about applying for a balance transfer. With a 0% balance transfer card, you could transfer that bloated balance to a new card, with no interest to worry about as you concentrate on paying down what you owe.

So, what do you need to know to do this right? In this post, we’re going to give you five rules to live by as you choose, compare and pay down your balance transfer card, which should hopefully make the whole process as painless as possible.

Tip #1. Go Basic

When you’re choosing a balance transfer card, basic is better. Especially if your focus is clearing that debt. There are plenty of cards out there offering perks and rewards alongside balance transfer offers, but unless you know you have the organisational skills and the money to pay off both new spending and your transferred balance, these cards are best avoided.

With a basic card, there are no rewards to earn. That means you are not spending simply to make sure you earn enough in rewards to make paying the account fee worthwhile. With a basic card, there are also no perks and extras to draw your attention from what’s important: paying down what you owe and clearing your debt.

Tip #2. Read The Small Print

When you apply for any credit card, you should always read the small print. End. Of. Story. Yes, it may be tedious, yes, it may be time consuming, but reading the small print can mean the difference between you choosing the right card with the right balance transfer offer, and you choosing a card with an offer you don’t really understand.

What that can lead to is an expensive mistake. Let’s say, for example, you choose a card with a 0% balance transfer offer that lasts for six months. You don’t work particularly hard to pay off your transferred balance because you think it will revert to the card’s low purchase rate at the end of the offer. But, you are wrong. It actually reverts to the much higher cash advance rate, meaning you pay much more in interest as you then work on paying off what you owe.

Tip #3. Look Beyond The Offer

Some cardholders simply apply for credit cards to take advantage of their introductory offers. After the offer is done, they close that account and move onto the next card. For those cardholders, what happens beyond the offer isn’t that important.

On the other hand, if you are planning on keeping the card once you’ve made use of its offer, you really should know what the card provides in the longer term. Look at how much you will pay in account fees and interest, and what the card offers in terms of rewards and extras in return. You should also look at minimum and maximum credit limits and other factors that might apply to you.

Tip #4. No New Spending

While it can be tempting to spend on a new credit card, this isn’t generally recommended when you have a balance transfer. First and foremost, spending on your card increases the balance, which means you will have to work harder to pay off new spending plus your transferred balance. Unless you can afford to do this, you should avoid all new spending altogether.

It’s also worth checking how your card provider applies payments you make on your card. If your card provider applies new payments to the balance attracting the lowest interest first, it will pay down your transferred balance first. If new payments go to paying down the balance attracting the highest interest first, it will pay down new spending and cash advances first.

On top of that, you should know that there are no interest free days when you have a balance transfer. So, any new transactions you make on the card will start attracting interest from the day they are made, giving you even more to pay back.

Tip #5. Set Up A Repayment Schedule

When you transfer a balance, you know exactly how much you have to pay off within the intro period. To ensure you clear that balance, work out how much you need to pay off each month to pay it all off before the intro period ends. Then, set up an automatic payment on the account so you can forget about it.

Remember, you will have to increase your auto payments if you decide to spend on the card.

Time to compare your options? Check out our range of 0% balance transfer cards and get comparing!

Founder - Roland B Bleyer

Roland Bleyer

Founder of Roland has extensive knowledge about credit cards in New Zealand. Known as a credit card expert, he has been featured on tv and in various publications.
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