Maximising Balance Transfers
There was one point in time when I was not able to keep up with my credit card outstanding sums resulting in having a carry-forward amount the following month. The end result is straightforward – there is interest to pay. And a pretty high amount of interest at that. What I did was to utilise a balance transfer process to another credit card.
Many credit cards offer a balance transfer facility whereby you can shift your current outstanding sums / debts from other credit cards to the card which grants you the balance transfer facility. Most of these balance transfer facilities come with an initial low, if not 0%, interest period. So, if you are already paying 18% per annum on your current credit card debt, it would make sense to transfer the whole outstanding amount to another card under the balance transfer programme. This would save you a whole lot of interest payment – provided you do not incur new expenditure on your credit cards.
Before you execute the balance transfer, it would be advisable that you look out for the credit card which provides the best credit offer. Find out how long is the introductory period. The longer, the better. This would provide you adequate breathing room to manage your credit card debt. Find out also whether the special interest rate granted to you is only restricted to the transfer amount or whether it also applies for new purchases. Next, are there fees and charges involved for utilising this balance transfer facility? Some banks charge a one-time administrative fee. Some charge a percentage based on the amount transferred.
Finally, find out whether the amount transferred gives you any other rewards – eg. accumulation of points or rebates.
Managing Multiple Credit Cards
Is it really possible for one to own multiple credit cards at any one point in time? The answer is yes. I have about 6 credit cards in total and thankfully, I am not in credit card debt. How do I manage multiple credit cards without getting into debt and at the same time, reaping all the benefits from the credit cards eg. rewards points and cash backs for my purchases? Let me share with you some examples.
Firstly, understand that the interests accruing on credit card debts are probably one of the highest chargeable amongst all the financial facilities granted by a bank. With interest rates reading something like 20% or higher in some countries, you would be foolhardy to take credit card debts lightly. So, make it a point not to accrue any interests by paying your outstanding amount in full monthly.
Secondly, having appreciated that it is in your interest to pay in full every month, make it a point to track your expenses incurred on your credit cards. Do not overspend. It is easy to overspend since you need not empty your wallet of your cash as all you need to do is just to swipe your card. Set a budget for your monthly expenses and if you intend to spend on something luxurious or special for that month, set aside a sum of cash and put it away in a deposit or something which you can withdraw when it is time to make your credit card payment.
Thirdly, choose and use your credit card wisely. It is my habit to park all my credit card use on one particular card. This card gives me the best rewards points per dollar spent. When I park all my expenses on that card, my rewards points grow faster and this would allow me to redeem it with something I like later. Some cards have specific benefits eg. cash back for petrol purchases. With that in mind, I use that cashback credit card solely to pump petrol. I keep the rest of the cards for emergency use. It is good to have 1 or 2 credit cards on standby in case you need extra cash during emergency situations. Apart from that, just keep them aside.