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Understanding Balance Transfer Cards with O1ne Mortgage

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding balance transfer cards. For any mortgage-related needs, feel free to call us at 213-732-3074.

What Is a Balance Transfer Card?

A balance transfer credit card allows you to move the balance of one or more credit cards to another, typically to take advantage of better terms and conditions. These cards are often used to consolidate credit card balances and save money on interest by utilizing a lower annual percentage rate (APR). Many balance transfer credit cards attract new customers with a temporary 0% intro APR offer, which may apply to both balance transfers and purchases.

What Are the Downsides of Using a Balance Transfer Card for Purchases?

While you can use a balance transfer card to make purchases, it is generally unwise unless you can immediately repay the full balance. Purchases may not benefit from the same 0% APR terms as your transferred balance, potentially increasing your interest costs and the time it takes to pay off the balance. Additionally, carrying balances with different APRs can complicate your monthly payments, as issuers often apply payments above the minimum to the balance with the highest APR.

The Best Ways to Use a Balance Transfer Card

When used correctly, a balance transfer card can be an effective way to pay off high-interest rate balances. Here are some tips to maximize its benefits:

• Understand the terms and conditions: Pay close attention to the length of the introductory period and the ongoing APR after the promotional rate expires. Ensure you know whether the 0% APR also applies to purchases.
• Review the balance transfer fee: Balance transfer fees can be a percentage of the amount transferred, so compare this fee to the interest you would pay based on your current APR and monthly payment.
• Have a repayment plan: Aim to pay off the transfer balance by the end of the promotional period to maximize interest savings. Calculate your minimum monthly payment by summing the balance and the transfer fee, then dividing that amount by the length of the introductory period.
• Avoid new purchases: Mixing balances with different interest rates complicates the repayment process. Even purchases on other credit cards can reduce the amount you can afford to pay toward the balance transfer.

The Bottom Line

While it is technically possible to make purchases on a balance transfer card, it is not advisable if the promotional APR only applies to balance transfers. O1ne Mortgage can help you compare different balance transfer offers to find a credit card that offers a 0% intro APR on both balance transfers and purchases. For any mortgage-related needs, call us at 213-732-3074.

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