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How to Use a Balance Transfer Card

Don’t use the card.  If you have a balance transfer card that you have gotten to lower your debts, don’t use the card for purchases.  This is one sure way to totally screw up the reason for getting the card.  You want a card because you are going to lower your debts, so first you shouldn’t chose a deal and then continue to use credit cards.  This is only going to keep the cycle going, but more importantly any card that is obtained for you to use as a balance transfer card is going to be more expensive for purchases.  In other words the purchase APR is usually around 14.9% or higher on the credit cards.  You are going to create more problems if you blend purchases with a balance transfer because you are no longer just paying the card down.

Okay so look at it this way, any credit card will allow you to purchase, shift balances, and withdraw cash.  These transactions are going to interact on the card.  If you purchase with the card you are going to have a balance that is charged interest, but the entire balance is lumped together on the card.  You don’t have a section for balance transfer that is 0%, a section for purchases that is 14.9%, and then a cash withdrawal section for 25%.  Instead the entire balance on the card is lumped together, so when you pay it down you are not just paying the balance transfer or the purchases you are paying it all.  This means that if you have exactly the amount you purchased on the card after you pay what you consider the balance transfer you aren’t paying off that purchase you are just paying off a balance with interest.

Here is another way of looking at it.  You are repaying your cheaper debts first.  In other words you are not choosing where the payment is going the credit card company does.  Most lenders are going to pay off the lower interest debts first.  This means that the expensive debts are kept on the card.  So yes you are paying off the balance transfer first as it is the cheaper debt, but you are still being charged 14% interest on the purchases for the entire period.  You had a year to pay off the balance transfer before being charged interest.  Let’s say you purchased something the first month.  For the next twelve months you are paying down the balance transfer, but you are also being charged interest for the purchase at the current APR.  So it is a very big deal that you do not use the card for purchases as you are not paying off the purchase, but the balance.

Return To Financial News February 2008
A Poorer Credit Card Score Deal
Balance Transfer Explained
Finding a Balance Transfer Deal
Finding the Best Credit Cards
How to Use a Balance Transfer Card
Questions on Balance Transfers
The Best Deal
Top 0% Deals
What Are National Savings and Investments

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