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How Moms Can Save Using A Balance Transfer

It’s a new year and after the presents and parties of the silly season, your credit card may have been a bit overworked. We all know Santa can be a drain on our finances. So how do you get back on track?

 While it might seem like flawed logic to pay off one credit card debt by using another, a balance transfer can help you accelerate your credit card repayments and consolidate your debt. By transferring the balance on your credit card to a lower interest rate credit card, you can get back in control of the family finances and start some serious saving.
What is a balance transfer?
A balance transfer involves taking the debt from one credit card – which often has a high interest rate – and transferring it across to a new card that has either a 0 per cent or ultra-low introductory interest rate for a period of 12-24 months. This means you pay no interest on this transferred balance for that period, which can save you hundreds of even thousands of dollars in interest. Sounds good, right?
It can be good, provided you do your research and use it responsibly. There are some factors to be aware of when it comes to choosing a balance transfer and you want to make sure you select the right card for you. A balance transfer credit card only makes sense if it’s going to save you money. These are some of things you should consider when making a decision about a balance transfer credit card:
● The balance transfer fee – there is usually a 3-5 per cent fee for the amount you transfer across. For example, if you transfer $8,000 to your new credit card, you might be charged $240 to secure the 0 per cent rate
● The balance transfer period – when the introductory rate expires
● The revert interest rate – the new interest rate once the balance transfer period ends
● Annual fees – any hidden or extra fees
All this information may seem overwhelming. If you’re a mom with kids and a busy schedule on your hands, you might not have the time or the energy to do a lot of research. Thankfully, RateCity can do the work for you. Its database compares different credit card interest rates and deals, so you can see the balance transfer fee, revert rate and the balance transfer period all at once and make an informed decision.
How can I make the most out of a balance transfer?
A balance transfer can be like fighting fire with fire, so it’s not without risks. The first step to making the most out of a balance transfer is using a financial comparison site to find the best card for you. All things being equal, you should go for a card that has a low balance transfer fee, a long balance transfer period and a low annual fee.
In order to maximise your savings and reduce your debt, you need to pay off your transferred debt before the 0 per cent introductory rate expires. Otherwise, you’ll be paying interest on the remaining balance and potentially getting yourself into more debt. To do this, be aware of the minimum payment you should be making each month by dividing the total transferred balance by the introductory period (for example if you transfer $8,000 onto a credit card that has 16 months interest-free, you should be paying off the debt at a rate of at least $500 a month). Make sure to set up a direct debit or automated payment to prevent you from falling behind schedule.
Keep in mind that these cards only remain interest-free when no purchases are made, so don’t use a balance transfer credit card to make purchases, and try not to spend on your old credit card either. Sometimes, this is easier said than done, so if you are tempted to spend, cancel your old credit card and use a debit card instead. The process of obtaining a balance transfer credit card means having a look at your spending habits and deciding how you can cut down. You can’t continue your normal spending while trying to reduce your debt through a balance transfer.
Once you’ve paid off your debt, you might want to cancel the balance transfer credit card as well. That way, you’ll be debt-free and won’t be tempted to accumulate more debt.


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