Credit Card Debt Transfer

Credit cards allow us to do a number of different things such as spend on them
shift balances to them or withdraw cash. These are all different ‘transaction types
and it’s the interactions between them that cause the problem.

• Each type of transaction has a different interest rate. Thus while it might
be 0% interest rate for balance transfers, any spending
is likely to be at a much higher interest rate and cash withdrawals even more.

• Your repayments are biased towards clearing the cheap debt first.
You can’t choose what your money goes to, the credit card company does.
And lenders almost always automatically bias your repayments to pay off
the lower interest debts first.

Credit Cards 0% Balance Transfers

The expensive debts from spending are effectively trapped, speedily
accruing interest and you can’t repay them until you’ve cleared all the cheap debt.
Thus it can cost a fortune. This is very profitable for lenders; it’s why many cards
with good balance transfer deals also have enticements like reward points
cash-back deals or short term 0% interest rate deals for spending.

While it mightn’t look a big deal; it’ll cost you a fortune. So much so, it’s often
cheaper to get a separate card for spending even if it has a higher
‘spending rate' (though of course better still get one with a cheap rate).
Therefore as a strict rule, never, ever, ever spend on these cards! Just transfer
the balance, make the repayment and put the card away.

Stay out of debt with a prepaid credit card;