Credit Card Balance Transfer – 6 Things To Consider
After knowing the basics of Credit Card Balance Transfer and finding out how you can use the process to drastically reduce the interest you’re paying on your current card, you may be tempted to do it right away. But before you do so, here are some things to consider to help you make the right choice:
1) How competitive is the introductory interest?
Normally, card issuers offer an introductory interest rate for new transfers. They are much lower than normal interest rates, though they only last for fixed periods of time. If you’re incurring 17.5% interest right now, an introductory rate of 6.99% for one year means you’d be saving more than 10% in financial charges over the next twelve months! Take note that some banks actually offer zero interest periods, so make sure you do your research.
2) How long can you enjoy the lower rate?
Depending on the credit card company you choose, the new lower rate you enjoy may last from a few months to a few years. When deciding on a good card to transfer your balance to, try to find one that offers the longest possible period. A few months and a few years of low interest can make a world of difference.
3) How much lower is the interest rate?
When your introductory period expires, you’ll revert to normal interest rate much like the one on your current card. So, always compare the rate of your new card against your existing one. If you plan to carry a balance beyond the introductory rate, a credit card with significantly higher normal rate may hurt you in the long run.
4) What is the fee?
Generally, transferring your balance is not free. When you transfer your balance to a new account, it is common for your new card issuer to charge you an upfront fee in the realm of 3% of the amount you wish to transfer. Make sure you take this into account – for you might be saving tons from your introductory rate, but taking a beating on the transfer fee!
5) Do you qualify?
Just because you see an ad screaming “0% Interest Rate” doesn’t mean you actually qualify for it. Do call up to ensure you’re qualified and are actually getting the introductory rate you think you are getting before you undertake the process.
6) Have you read the fine prints?
As of everything that has to do with money, read the fine prints. It’s better to be safe than sorry.