Balance Transfer Credit Cards
It is not hard to have credit cards maxed out before you know it. Soon, though, the bills calling for payment on those things you bought begins to take its toll on your available funds. Before you know it, it may be next to impossible, almost, to catch up on your bills. Another credit card, however, may be just what you need to be able to give yourself a handle on your debt. In fact, a new balance transfer credit card may be just what you need to consolidate your debts.
Balance transfer credit cards enable you to transfer debt that you already have on one card to another one. As an introductory offer, many credit card companies that offer this type of credit card provide special deals on this type of transaction. Good balance transfer credit cards will offer you 0% APR interest for up to 15 months. This means that you pay no interest charges on the amounts you transfer to it.
The advantage here is obvious. Instead of continuing to pay a high interest on your credit cards, which actually reduces your payment toward the principal, a new card saves you money. You pay no interest for awhile, so all of your payment goes to reduce the principal on your old bill - unless you have added other purchases to the credit card.
Debt consolidation on this kind of credit card makes a lot of sense - especially if you take care not to max out your credit cards again. There should be some new restraint on those other credit cards - destroying some of them would probably be better for most people.
A balance transfer credit card is great for consolidating smaller debts onto one card. Look over the offers carefully, however, because some of these cards have fees for the transfers - up to 4%. You also need to know that some cards do not allow you to transfer any debt to them after you get it. All transfer amounts need to be listed on the application, in those cases.
The introductory offer will vary too, in some situations, so you need to pay careful attention. Sometimes the balance transfer portion of the special introductory offer is only for three months, and the other features of the same offer may apply for one year. This will take some careful reading on your part to make sure you get what you think you are getting. Obviously, only three months of 0% APR interest will help – but not much because it is so short.
Debt consolidation with one of these credit cards gives you some time to catch up on your bills. Be careful, however, to make sure you pay your bills on this new card on time. Some of these lenders, when you make just one late payment - or not a minimum payment, will take away the introductory offer rates and may give you an interest rate up to 29%! Needless to say - that won’t help you reduce your debt!
The Ways to Avoid Unnecessary Fees
If you want to reduce debt, it’s important to avoid being charged unnecessary fees by your credit card provider.
But that’s where the problem begins. For years, banks and credit card providers have been making vast profits through a variety of extortionate charges and penalty fees.
In 2017 banks in the US raked in almost $28 billion in credit card fees. That’s more than $250 per US household, and it’s a similar story in many countries across the world.
However, in recent months, banks have had to cope with a slower increase in consumer borrowing, increased levels of bad debt and stricter regulations on the level of penalty fees that they can impose upon their customers.
So in order to replace this lost income, the banks have devised a range of sneaky ways to screw extra cash out of their customers.
So here are the most common credit card fees that you’ll experience and how to avoid them.
Number One - Low Usage Fees
Certain credit card providers have recently introduced a no-balance or low usage fee. This means that if you don’t buy much using your credit card or if you pay off your bill in full each month, some card companies will charge you a one off penalty.
Other card companies have introduced monthly or annual fees for users who spend less than a certain amount on their credit card each year.
So what they’re really saying is ’Keep spending so that we can make vast profits at your expense through fees and interest. And if you don’t, we’ll make vast profits at your expense through low usage fees.’
Unfortunately, if this fee is charged according to the amount that you spend monthly or annually on your card rather than your outstanding balance, the people that it will hit hardest are those who are trying to get out of debt.
People who have stopped using their credit card so that they can repay their debts, may now be faced with an annual fee or a low usage fee.
There are ways to avoid this;
Route your day to day spending through your credit card so that you can avoid any low usage fees. This is only a valid option if you trust yourself to limit your spending to necessities and repay at least as much as you spend each month.
Write to your lender and tell them that if they insist upon charging a low usage or annual fee, you’ll take your business elsewhere. They may waive the fee. This is more likely to happen if you owe them a considerable amount and always make your repayments on time.
Move your credit card debt to a provider that doesn’t charge a low usage fee. However, as you’ll see below, the rise in balance transfer fees may make this move counter productive.
Consider paying off all your credit card debt with a consolidation loan then get rid of your credit cards.
The Advantage Credit Cards Consolidation
When you’re in debt there is much stress on your mind as well as on your physical body. For that reason many want to get out of the situation any way they can, and after searching through your different options, and ruling out bankruptcy, you may find that it’s wise to try to negotiate a debt settlement.
Some people will tell you that it’s a bad idea, but when you’re in a deep mess it actually can be very helpful.
You first need to educate yourself on the entire goings on when it comes to negotiating a debt settlement.
You need to realize that the lender really gets no real benefit to settle your debt; after all, you promised to pay back what they lent you. This was a contract made in good faith, however it’s understandable that sometimes things just happen and we cannot repay what we owe. Every one has a personal finance dilemma now and then.
So you may still be wondering if this whole debt negotiation thing is a good idea or not. Basically, yes if you’ve been through the ringer, trying to pay off your debts and it’s impossible then it is a good idea. After all, why keep a blemish on your credit report when a little negotiation can go such a long way for saving your financial future.
At your disposal is also debt consolidation, which may be a bit more appropriate for you. If you can find a reliable credit counselor they can help you obtain your credit consolidation loan, and go about things the correct way. If everything goes as planned, you’ll end up with a loan that has a longer period, and a smaller monthly payment. It’s important to note however that this false sense of security that a smaller payment gives you can actually create extra trouble for you, since you may just go right back to your regular way of reckless spending.
Sometimes, if you’re an industrious person, and are very motivated to turn your life around, you can call your creditors yourself and try to negotiate a debt settlement. Often, if you’re nice and let the lender know that you really want to try to fix things, they will help you out in a big way. Don’t go into it defensively.
Again, there is the fact that the debt negotiation is going to lower your credit score, however when you obtain the negotiation loan the lender is required to let the creditor know that you have paid off your debt in full, and it is noted as so on the credit report.
Some of the debt negotiation companies also offer a service, usually for a fee to have a credit repair service remove the negative items on your report caused by the program itself. It’s a very good option though you have to pay.
Be careful in choosing your debt negotiation company, and be sure to recognize your second chance and treat it with respect.