As more of us struggle to pay off high interest credit cards, 0% or low rate balance transfers are coming to the rescue. Or are they? Credit card balance transfers can be really handy, provided you’re aware of some of their shortcomings. Here is our list of the top 7 things you need to know when contemplating a credit card balance transfer.

Always make your payments on time

It’s very important to make payments on your balance transfer credit card on time. These types of credit card accounts generally make prompt payments a condition and if you skip or miss them you could be penalised.

Know when the low rate period ends

Most credit card balance transfer deals have an introductory low or no rate period which is usually three, six, nine or twelve months. In order to make the most of your balance transfer you need to know when this introductory rate ends. Make note of the date and work towards getting the majority of your credit card debt paid off by this time.

Read the fine print

As with any banking product, make sure you read the fine print associated with your balance transfer credit card. If you’re unsure of any conditions, speak to a customer service representative before you apply.

Don’t use the card for cash advances

Cash advances on a low or no rate balance transfer credit card are a no no. These cards are really handy to pay off large amounts of accumulated debt, they’re definitely not designed for withdrawing cash or making purchases. Cash advances always attract a higher rate of interest and they’ll eat into any potential savings.

Don’t get tricked by payment hierarchy

Payment hierarchy is something that all credit companies do and it can catch consumers out. Here’s how it works - you transfer a credit card debt of $4000 to your new 0% balance transfer credit card. You also use this new card to make $1000 worth of purchases. Any payments you make will be applied to the debt that is attracting the lowest interest rate, in this case it would be your balance transfer. Any additional purchases attract a higher rate of interest and would only be paid off once the total of your balance transfer debt is paid.

Don’t leave it too late to switch

A lot of balance transfer offers are only available for a limited amount of time after you’ve opened your credit card account. The key is to get the balance transfer happening as soon as you have the card in your hand. A lot of credit card providers give you the option of automatically transferring the balance and closing your old credit card upon activation of the new balance transfer card. This is a great way to make sure you’re making the most of the interest free or low interest period associated with your new account.

It pays to shop around

The key to finding the right deal to suit your financial situation is to shop around. Balance transfer offers are becoming commonplace and all the banks are vying for new business. Pay attention to what the banks are advertising and do a bit of research online to see what deals are on offer. If you need a quick and easy way to find information about balance transfer credit cards use our handy credit card comparison tool.

If used right, credit card balance transfers are a great tool for reducing credit card debt. By doing a little research and understanding potential pitfalls before you sign up, you can save yourself some money and a lot of aggravation.