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12 Tips On Transferring Credit Card Balances That You Won’t Want To Miss

12 Tips On Transferring Credit Card Balances That You Won’t Want To Miss

Transferring credit card balances can be a great move financially. It can get you out from under exorbitant interest rates and give you a fresh start on making payments. Some credit cards even have low introductory rates from zero percent to 5 percent that can make paying off your balance easier and faster. That said, transferring credit card balances is a slightly convoluted process that you should be more educated about before proceeding. Here are some tips to help you figure it out.

1. Your debt will get bigger before it gets smaller.

Back in the day, transferring balances used to come at a rate with a maximum fee. That means you’d pay 3 percent or something like that for a certain amount but no more than $50-$75. These days, transfer caps are gone. If your balance is small then this isn’t a big deal but if you have thousands of dollars in credit card debt, the transfer fee can add up quickly. It is unavoidable but make sure you know how much will be added back onto your debt when you transfer the balances.

2. The introductory interest rates can be a trap!

Like we mentioned, some credit cards come with introductory rates between zero percent and 5 percent. These typically last for 6-12 months. If you cannot pay back your balance before the introductory rate, then you should pay attention to what the regular rate will be. These higher rates can range from 12 percent to 18 percent or even higher depending on your credit. Do yourself a favor and sit down with a calculator and make sure you’re actually saving yourself money by switching over!

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3. If you don’t pay your dues, they’ll make you pay in other ways.

While we’re on the topic of introductory rates, let’s talk about what happens if you don’t pay your bill. Pretty much all credit cards will cancel your introductory rate and give you the regular rate if you fail to make payments on time. Remember folks, there is no grace period when transferring credit card balances. Do not skip a payment or it can cost you!

4. Don’t neglect your debt while transferring credit card balances.

The process of transferring balances from one credit card company to the next can take some time. Experts say that it can take a month or longer for the process to complete. During this time, you’re still responsible for paying your bill every month. We’ve already discussed what can happen if you don’t make payments on time. Don’t sabotage yourself!

5. The best rates are reserved for those with good credit.

Sadly, those of us with bad credit don’t get the same features with new credit cards that people with good credit will receive. You may see credit cards that brag about having low introductory rates but if your credit is bad then those rates probably aren’t meant for you. It’s not uncommon for people with bad credit to be forced into taking less appealing offers like no introductory rates and higher APRs overall. You can still apply and try for things like introductory rates but don’t base your financial future on credit card features you may not be eligible to receive.

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6. Even more introductory rate confusion.

Some credit card companies will only give you the introductory rates for the amount of your balance. This means any purchase you make could be subject to the regular APR. For example, let’s say you transfer your balance of $3000 to the new credit card at the introductory rate of zero percent and then you go buy a laptop for $500. The $3000 would have the zero percent introductory APR while the laptop would be subject to the regular APR. Here is the kicker. Since most credit card companies apply payments to a split-rate account to the balance with the lower interest rate, that means that $500 will continuously increase until you pay off the $3000.

7. Don’t be a transfer junkie.

After reading through here, you may be thinking of getting a credit card with an introductory rate and then transferring to a new credit card with a new introductory rate in a year. It sounds like a good plan but you can be penalized for doing this. If you transfer your balances too many times, your credit can be penalized. Since paying off a credit card is supposed to increase your credit score, doing anything to prevent that is actually counterproductive.

8. Slash your cards.

This isn’t a technical tip but rather a figurative one. Due to all of the confusion and complexity of transferring credit card balances, it’s probably in your best interest to just hack up the cards. The accounts can remain open but let’s face facts here. If you’re in the kind of financial crunch that can motivate one to transfer balances, then you should probably not give yourself an opening to make it worse. Cut up the cards, pay off the debts, and many of the pitfalls we discussed today don’t apply to you.

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9. Take your time and find the best deal

This applies to everything, ever. Finding a credit card with a 12-month introductory APR of zero percent may sound great, but paying 18 percent APR after that could be very bad. Meanwhile, there may be a card out there with a flat 12 percent rate that would be a better deal in the long run. Shop around, do the math, and find the deals that will save you the most money. Do not get suckered into a bad deal because of an appealing opening offer. Finally, be especially careful of the old bait-and-switch tactic. An example of this is being pre-approved for a certain card with a certain balance and a certain rate but when you go to officially apply, you end up with something much worse than that. Unfortunately, this does happen.

10. Don’t try too hard or you’ll never get it done.

As with any other loan process, applying for a new credit card requires a credit check. It’s pretty much common knowledge that if you ping your credit over and over again then it will cause your credit to go down. If you can’t secure a credit card after a couple of tries, it’s best to give up and try again in a few months to avoid harming your credit because otherwise you may lower your credit which will just make it harder to get another credit card!

11. If you don’t slash it, then don’t spend it.

Earlier we suggested that you slash the old and new credit cards and we stand by that advice. However, we also understand that you may need to keep one of them around for emergencies. Spending $250 on a credit for shoes is a horrible idea but spending $20 in gas to get home because you don’t get paid until the next day is totally understandable. Should you decide to keep your old or new credit cards around, we recommend you don’t spend anymore money than absolutely necessary.

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12. Why are you in this situation to begin with?

If you’re transferring credit card balances then you are in some sort of financial trouble. Generally, the only two reasons people transfer balances is to switch to a card with a lower rate or because they’re experiencing problems with their current credit card and need a fresh start. In either case, look into what caused this problem. While transferring balances can save you money in the long run, it won’t save you that much money month to month. If you’re having trouble paying your credit card now, you’ll have trouble later too. Fix the underlying problem and you may be able to avoid this whole mess!

Wrap up

The bottom line is simply this: be educated. Make sure you read everything before you sign any paperwork. Don’t let fast talking customer service reps try to rush you. This is your money and your life and if you don’t feel in control of the situation then take a step back and assess the situation. There are no shortcuts so work hard and get it done.

Featured photo credit: Digital Trends via digitaltrends.com

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Joseph Hindy

A writer, editor, and YouTuber who likes to share about technology and lifestyle tips.

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Last Updated on August 20, 2019

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

5 Steps to Set Financial Goals

Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

1. Be Clear About the Objectives

Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

2. Keep Them Realistic

It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

4. Short Term vs Long Term

Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

More on this later when we talk about how to achieve financial goals.

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5. To Each to His Own

The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

11 Ways to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a 2 step process –

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

Ensuring Healthy Savings

Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

3. Make a Plan and Vow to Stick with It

Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Rise Again Even If You Fall

Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

5. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

If you are travelling buff, try to travel during off season. Your outlay will be much less.

If you go out for shopping, always look out for coupons and see where can you get the best deal.

So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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6. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

7. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

Making Smart Investments

Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

8. Consult a Financial Advisor

Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

9. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

Do you remember we talked about bifurcating financial goals in short term and long term?

It is here where that classification will help.

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So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

10. Compounding Is the Eighth Wonder

Einstein once remarked about compounding,

Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

Start investing early so that time is on your side to help you bear the fruits of compounding.

11. Measure, Measure, Measure

All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

The Bottom Line

This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

As you can see, all it requires is discipline. But guess that’s the most difficult part!

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