You’ve made the balance transfer. You “did the math” using the balance transfer calculator so you know you chose the right card for your needs. Pat yourself on the back!
Okay, so now you can relax, right? Well, not quite. Let’s go over just a few more things to make sure you avoid the most common mistakes that can turn a balance transfer into a nightmare.
Mistake #1: You stop making payments to your old credit card issuer before your balance transfer is complete
This can cause a situation where you get hit with a late payment fee (plus more interest) by your old issuer. Remember, your old issuer doesn’t know it’s your “old” issuer yet.
When the transfer process is complete, your new issuer will notify you. Then, you should check your old account online to make sure the balance is zero. And only then you should relax about the payments on your old card.’
Mistake #2: You fail to make the minimum payments on time
Many credit card agreements state that a late payment can result in the loss of your intro APR. This means you suddenly might have to pay the “go-to” rate on your balance.
Wait, there’s more. It could also trigger the penalty rate, which can be a sky-high APR. You can avoid this mistake by setting up email or text reminders. Most banks feature these reminder options or you can set it yourself in a variety of ways, including using free online money management software, such as Mint.
There’s a lot of technology at your fingertips today, so make good use of it. Seriously, this simple step can save a lot of financial heartache.
Mistake #3: Using the card for new purchases
This is a big one. When you chose the card, you looked at the math so you’d know how much to pay monthly to get rid of your debt. If you add to your balance, your previous calculations no longer work.
Your priority with a balance transfer card is to pay off your balance while you have a zero percent intro APR. Once you start making purchases with your card, you can slide deeper into debt.
It can certainly be tempting to use the card, especially if you also have a zero percent intro APR on purchases. But resist the urge to do so. Stick with your plan and pay off your debt before the intro rate ends. This leads us to the next mistake.
Mistake #4: Not paying attention to the “end date” of the intro period
It’s one thing to know that you have an 18-month zero percent intro rate. But it’s another thing to know the exact date when it ends.
Confirm with your issuer the date your transfer is complete. Based on the length of your intro period, determine what date the intro period ends. Set up a reminder system that will notify you when the date is approaching.
You can use the calendar on your smart phone or on your PC. It’s a good idea to send yourself a reminder when your halfway to the deadline to see if you’re on track to pay off your debt. Then send yourself another reminder when you’re a few weeks away.
If you still have a balance when the intro rate ends, you’ll start paying interest at the go-to rate. It’s very easy to be so focused on paying off the debt that you forget to think about the future.
Mistake #5: Making too many balance transfers
It’s understandable if your debt is so huge that you can’t pay it off during one interest-free intro period. But before you start opening another account to make another transfer, take a deep breath and consider the possible impact on your credit score.
The first issue is that your credit score gets dinged a little every time you apply for a credit card. The second issue is that multiple transfers can make you look like your debt is out of control. Credit card issuers get nervous when they sense a cardholder can’t control their spending.
So the result could be that you start getting denied for new cards or even for a personal loan. A better idea is to choose your balance transfer card very carefully. Pay attention to the go-to rate and make sure you can live with it for a while if you have to.