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Sunday, July 19, 2009

Easy Guide To Transferring a Credit Card Balance To a Better Credit Card

Easy Guide To Transferring a Credit Card Balance To a Better Credit Card

Transferring a high interest credit card balance to one with a better interest rate and/or better overall terms and features is usually a good way to reduce the amount of money you pay back on your existing debt. Depending on the “better” credit card you select, you may also be able to benefit from a rewards program or gain other features you didn't already have – including travel accident insurance coverage or an extended warranty program for new purchases made with the card. There are a few instances when a balance transfer is not the great deal it appears at first glance though, so it's important to do your research before moving your accounts around.

If you want to take advantage of a balance transfer offer, use this guide for a smooth transition from one card to the other, and avoid costly or time consuming mistakes:

Step One: Find a better credit card with a balance transfer offer.

There is no point moving money from one credit card to another unless you are going to benefit from it in some way. Sometimes people are mislead by the introductory rates and promotional offers – so it is important that you dig a little beneath the surface to see what sort of rates you'll be charged once the promotional period ends.

When looking at possible cards to replace your existing credit card, make sure you find out the following information in order to make an accurate comparison between your existing card and the new card:

What is the introductory rate and when does it end? Does the introductory rate apply to new purchases only? Does it apply to balance transfers? What is the cards APR (annual percentage rate) once the introductory offer is over? Does the card have an annual fee? How much is it?

This is an important consideration when looking at a card to move your existing balances to - What does the card charge for a balance transfer fee? Many cards charge 3-4% fees for transferring balances. If you've got a $4,000 balance on your card that you're moving to a new card, you're looking at a fee between $120 and $160 just to move the balance. If you're going to pay a balance transfer fee, you're going to need to save a whole lot of money in interest over the life of the balance on the new card in order to make that fee worth it.

Step Two: What are your chances of getting approved for the new card?

Just because a credit card offers a 0% or 2% interest rate on balance transfers does not mean that you will be approved for that offer. Cards always put their best foot forward; but sometimes people are approved for the cards under different terms, based on their credit scores and payment histories. Take a close look, because often the credit card you apply for will tell you that if you don't qualify for the terms of the offer they will issue you a credit card with higher interest rates or different overall terms. If this happens, will the higher rates be beneficial to you, or will you just end up with a second credit card that charges a fortune in fees and interest and the temptation to spend more because you have a new credit line available?

Step Three: Apply

If you find a card with a great offer that you've compared closely to your existing card and feel that you will save money through the new, lower interest rate and/or through the rewards program the new card offers – AND you've considered your realistic chance of being approved for that card and all seems ready to go; it's time to apply.

When applying for the new card, make sure to fill out the balance transfer portion at the time of application. The reason for this is sometimes the balance transfer offers are only good for immediate balance transfers that occur at the time of account opening. Balance transfers that are initiated later may be considered a cash advance and do not enjoy the same promotional terms your initial transfers do.

Step Four: Stop Using Old Card

If you've transferred the balance to a new and improved credit card, stop using your old credit card. Cut it up or put it away so you aren't tempted to charge on it. If you transfer the balance and then continue to use your old card, you've completely defeated the purpose of moving the money and now have TWO credit cards to pay off!

Easing the Burden of Interchange Fees

Running a small business comes with a host of unique challenges. Should it really be that difficult to accept credit card payments from customers? Sadly, for many business owners, the fight over rising interchange fees - the fees that credit card processors charge for each credit card transaction a business makes - is getting tougher. What was a $16 billion industry just seven years ago has turned into a $48 billion racket in 2008. Small business owners are watching their profits dwindle as more and more of their money is spent on interchange fees.

How bad is the problem? Soon, you might find it impossible to fill up your gas tank if you pay with a credit card. Gas station operators are losing money because they must pay an interchange fee on every gallon of gas their customers charge. As the fees increase, profits go down the drain. And with the rising cost of gas, some store owners just can't afford to pay the interchange fees. In some cases, the fees cost more each month than gas purchases bring in.

Small business owners are caught between a rock and a hard place. On one hand, they cannot completely refuse to take credit card payments if they want to stay competitive. On the other hand, they feel as though they have no power to negotiate the fees. Luckily, Congress has heard about this plight and has decided to step in. There is proposed legislation that will permit the investigation of hidden fees that businesses report as being unfair. While some balk at the idea of the government getting involved, others hope that new rules will ease the pressure on small businesses.

If you own your own business and feel the pinch of high interchange fees, there are some steps you can take. First, look for merchant account providers that offer “Interchange Plus”. This is a straightforward pricing scale that used to be available only to big businesses. Now smaller businesses can take advantage of this simple alternative to the complicated, tier-based pricing structures currently in place. Some businesses save tens of thousands of dollars each year just by participating in an Interest Plus plan.

Another thing you should do is watch out for hidden fees. Avoid contracts that make you pay an interchange fee for declined transactions. Instead, look for a contract that doesn’t require you to pay for unauthorized charges. And ask plenty of detailed questions before you sign that dotted line.

Finally, look for merchant account providers that offer great customer service. When something goes wrong, you want to know that you can call the company and get it straightened out in a timely manner. This might mean ignoring the companies that offer rock-bottom rates. Remember that with customer service, you usually get what you pay for.

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