Debt Consolidation Mistakes – The Balance Transfer

Debt consolidation sounds good when you are drowning in debt and are desperate to get to dry land. Be careful, you may make a mistake in trying to swim your way out of debt. Credit card balance transfers are just one several mistakes that you could make along the way if you are not careful with what you are doing.
Consolidating your debt can make a difference for you but it may not solve all of your debt issues. Be on the look out for these various ways to consolidate your debt: balance transfers, debt consolidation loans and other get out of debt schemes. In this article we’re going to look at credit card balance transfers a little closer.

Should I Do A Credit Card Balance Transfer?
Using credit card balance transfers to get out of debt can be very effective. These offers are everywhere – from your email to your mailbox. Credit card companies are climbing all over each other to get business so there are some great offers out there. One of the more popular offers right now is the 0% Interest on Balance Transfers. And to make these offers better yet, some credit card companies now in 2008 are offering this interest rate for up to a year.
If you are going to use this method for getting out of debt, pay attention to these next points, they could save you and your credit.

Teaser Rate Introductory Period
Introductory Rates can really work in your favor if you use them correctly. The credit card companies are banking on the fact that you won’t. Once the promotional 0% honeymoon is over the interest rate will jump and so will the payment.
If you are not on top of when your teaser rate ends you could be stuck with a payment that you do not like or can’t afford for a few months until you can get a new program lined up.

Beware Of Automatic Payments And Interest Rate Changes
I had my payment on auto pay and didn’t pay attention to it much. I know, shame on me, but I know that I’m not alone in doing this. My required monthly payment changed but I never changed my payment accordingly until the credit card company called. I had to do some fast talking and payments to get it worked out, but I did.

Derailed By A Late Payment – A Real Deal Show Stopper

Have you read the fine print of your credit card universal agreement? If not, get it out and read it. You’ll find two things there that are worth paying attention to. First, what happens to your interest rate during the introductory period or thereafter if you are just one day late on your payment?

Credit card companies have no tolerance for late payments. It seems as if they just can’t wait to report your late payment to the credit bureaus so you won’t be able to get a new card to move your balance away from them. If you are a day late, you could find yourself with rapidly decreasing credit scores all of a sudden and an interest rate jacked up to maybe over 30% and no way to get another card.

Universal Default Clause

The second real fine print worth paying attention to will show your card’s Universal Default Clause. This dandy little section of your credit card agreement says that your credit card company can jack your APR up for not only being late on a payment to them, but to any other creditor that you owe money to. That’s right, they can change your card’s APR without notice and without even knowing why you missed the payment.

Not all Universal Default Clauses are the same, so you will want to pay close attention to yours as well. Do not assume that just because you only missed a payment to one creditor in a month that the other creditors haven’t taken action against you too. Surprises stink, especially when trying to make a purchase with your credit card and it gets declined out of the blue.

The bottom line is this: if you are going to use credit card balance transfers for debt consolidation, you must pay close attention to what you are doing. Make extra payments during the introductory offer period, keep an eye on the end of the intro period, and don’t miss payments on anything. If you do these things, using their interest free offer can be an excellent way to swim out of debt.