Tips for doing balance transfers the right way

By Chesutiko

There's an art to taking advantage of balance transfers. The key is paying attention to the details.

Balance transfers are commonly misunderstood. Because of this, there are many throughout Australia who may end up having to make payments they were not expecting. Although balance transfers have their benefits, they also have their drawbacks. It is always best to proceed cautiously when dealing with balance transfers, or any other aspect of credit cards for that matter.

Read the terms and conditions carefully
The first rule is: Always read a credit card's terms and conditions -- and understand them. When making a balance transfer to another credit card, there might be conditions that alter how much you may have to pay. One of the most obvious charges is a transfer fee. While there may not always be one, usually there is. It's important to take note of how much that fee is; sometimes it can be quite high. Always shop around for the smallest transfer fee.

Another thing to watch out for is the interest rate of the account you are transferring to. While this may seem like one of the more obvious things to be aware of, it can sometimes be a surprise to those who haven't read the terms and conditions closely. That's because the interest rate may be low to begin with, yet as soon as you miss a payment, your interest rates skyrocket. The best kind of balance transfer deal will feature a low interest rate that is fixed for an extended period of time.

Potential benefits of a balance transfer
There are many advantages that come with a good balance transfer deal. First, if you are in good favor with the bank and keep up your payments, you may have the option to transfer your credit debt from a credit account onto your mortgage account. This can work to your advantage if your mortgage account has a lower interest rate. Banks will also feel more comfortable with this idea and are therefore more likely to agree to it because your mortgage debt is what you owe on your assets. If you are not able to pay off the total amount, then the bank is able to repossess your belongings to earn back what it's lost. If you're unsure about your ability to pay, it is always best to consult a financial adviser before making these types of weighty decisions.

Above all, patience
Overall, be very cautious and make sure you have done your research. Always be patient when looking around for the best deal. It may take time, but you should only ever settle for a deal you are happy with. If you are having second thoughts, then it is best to learn more about it or back out of it completely.

Article by Chesutiko 

Published: June 3, 2009