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The Pitfalls of Balance Transfers

I’m sure many of you are receiving all kinds of offers from credit card companies offering low interest rates, 0% to 2.99% on balance transfers or new purchases.  These seem the perfect opportunity to pay off those higher interest rate cards that you presently have. However, these seductive rates do come at a cost if you don’t know what to look out for.

So have at look at these five tips to avoid getting taken advantage of, when taking advantage of balance transfer offers:

#1 Inspect the Interest Rates
When playing the balance game, the best bets are obviously the lowest interest rates available.  These days if you have a pretty good credit score, you can normally find a 0% interest teaser rate that can greatly reduce the amount of interest you’re currently paying. But be wary: these offers eventually expire, and, if they’re not paid off, can often default to a higher rate than you’re currently paying. So, the rule of thumb is, if you can pay off the balance before the end of the promotional period, it’s a good time to transfer.

#2 About That Promotional Period.
In the end, the longer the promotional period, the better. Choose a year or more to pay off your promotional rate and leave those 6 month cards to the more gullible guys.

#3 Find Out About Those Fees
Some credit card companies make their money on 0% balance transfer offers by charging a certain percentage of the transfer amount to front the exchange. Keep in mind that transferring a $10,000 balance transfer with a 5% transfer fee mean you lose $500 in the process. It’s important to also factor in an annual fees, which can make the balance add up in the end

#4 Get Used to Reading the Fine Print
The easiest way for credit card companies to slam you with extra fees following your balance transfer is if you miss a single payment—a fact often hidden in the card offer’s very fine print. Make sure you know what to expect by taking a little time to inspect the tiny type on your latest offer.

#5 Take Heart With a Good Transfer
Imagine a world with no balance transfer fees, ones that would increase your current credit line along with the transfer, or were 0% for the entire life of the transfer balance. It may seem very 2001 the very notion of these types of offers, but if you find these types of pre-recession rates, snatch them up and pay down those costly credit cards while you still can.

Keep in mind, the balance transfer “game” is only easy for those who are good at juggling their accounts and paying off debt quickly with cash they already have. For example, you can pay off one credit card loan by borrowing from another card that carries a low, introductory rate and save some money, if, (and that’s a big “if” in this economy), you can pay off the transfer before the interest rate jumps back up to where it will inevitably jump after the promotion ends. If you’re considering bankruptcy, you’re not likely in the position to play this game, plain and simple.

And, if you are bankruptcy bound and have transferred balances, address this fact with an attorney. Because balance transfers are essentially a loan that you’ve borrowed to address another loan, if you file for bankruptcy within 90 days of the balance transfer, the transferred debt could be presumed to be fraudulent and therefore exempt from being wiped away in bankruptcy. These transfers are also payments on existing debts, and as such, the trustee could also attempt to recover that amount for creditors, making your case more complicated.

So, if you have been effected by the economy, are facing insurmountable credit card debt and are wondering how to get back on track, knowing a qualified bankruptcy attorney can also help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost. The bankruptcy attorneys at Capone & Keefe offer free consultations to discuss these and any other bankruptcy issues you may have, just call toll free 1-888-540-4795 to set up you consultation today.

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