$100 and $150 sign-up bonuses seem to get most of the attention in the credit card world, even though you might be far better served — and save far more — with the right balance transfer deal instead.
Tip #1: DO take advantage of balance transfers. There’s a featured balance transfer deal from Discover over on Outlaw right now which offers 18 months — that’s a year and a half! — of 0% Intro APR on an approved balance transfer, and 6 months of 0% Intro APR on your purchases for 6 months as well. This allows you to move a balance away from a high-interest credit card and onto the new Discover card for that period of time. With a balance of, let’s say, $10,000 on a card with a 15.99% non-promotional APR, the balance transfer deal would save you $1,599 in the first year alone… That’s more than 15 times what you’d earn with a simple $100 cash back bonus.
If you’re looking for a balance transfer card with many other perks, also peruse Capital One’s latest offers. They have a number of cards with 0% Intro APR until May 2013, and even one until August 2013.
Tip #2: DO concentrate spending on one or two cards. Your cash back or air miles will accrue faster, and you’ll also avoid “card fatigue” where you are using so many different cards that it becomes difficult to remember all of your credit limits, upcoming payment due dates, and so on. Ideally, you’d use one credit card most of the time (with a second as a back-up) and pay off the balance in full each month before your statement’s due date. This way, you reap miles or cash back without ever spending a dime in interest charges. Easier said than done, of course, but Outlaw has many readers who have disciplined themselves to do just that.
Tip #3: DON’T treat your credit limits as “cash in the bank.” By this, I mean that you should not assume a $5,000 credit line here today will be here tomorrow. You can’t rely on it; the bank can slash your available credit line — or even close your account — with very little notice, and for rather mystifying reasons. I was once on a vacation where I assumed I would “be fine” because I had a large portion of my credit limit left, even though there wasn’t much cash left in my checking account. Randomly the bank decided to slash my limit, meaning I was suddenly on vacation with almost no access to money. Not fun.
A credit card really is a “privilege” and not a right. Although having a second credit card as a back-up makes a lot of sense, if it is financial peace of mind you’re after, nothing beats having a few months’ salary saved in a checking account at the bank and accessible via a simple, no-frills debit card. Unlike a credit line, this can’t be taken away from you without notice. The money’s yours.
Disclosures: We’re a credit card promotions site, and as such we maintain financial relationships with numerous banks and financial institutions, including offers and cards mentioned or featured herein. This article originally appeared in slightly different form on Credit Card Outlaw.
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