If you carry high interest rates on your credit cards or if you have balances on several cards and are having trouble keeping up with all the payments, a credit card balance transfer could be a good deal. When you do a credit card balance transfer, you move a balance from one card to another, either one of your existing cards or a new card that you open. Before you attempt a balance transfer, there are some things you should know about the process.
Beware of fees
Though transferring a credit card balance to a card with a lower interest rate can probably save you money in the long run, you have to watch out for fees that can eat into that savings. Most credit card balance transfers involve fees of anywhere from 3 percent to 5 percent of the balance you are transferring, and there usually is a minimum fee. If you are transferring $500 and the fee is 3 percent, that would be $15, which doesn’t seem like that much. But you could have a minimum fee of $79, which would really be more than 15 percent.
Watch the introductory rate
Credit card companies often offer introductory rates that may be as low as 0 percent to entice people to open an account and transfer balances. This can be a good deal and save you a lot of money, but only if you use the introductory rate to pay down your balance. If you only pay the minimum payment on a 0 percent rate for 12 months, you won’t save much money.
Watch the continuing rate
While 0 percent balance transfer offers are great, you need to be aware of what the rate on the card will change to. If you can’t get your balance paid off during the introductory rate, then you will have to start paying at the new rate or transfer to another card. If your new card has a regular rate of 19 percent and your old card has a rate of 15 percent, the balance transfer may not be the best deal.
Be wary of your credit score
Opening new cards to do a balance transfer can temporarily lower your score a bit. Also, if you close any of the cards from which you transferred balances, that also can lower your score. On the plus side, however, using a balance transfer offer to lower the amount of debt you have can boost your score a bit in the long run.
Credit card balance transfers can be good deals as long as you pay attention to these and other factors.Tags: featured