Considering a Balance Transfer? Here’s What to Know

Much of the nation is really following the advice of financial experts and are working hard at paying down their debts. Along with finding financial freedom, consumers have also begun to refocus on their credit rating now that an even higher score of 740 is considered to be a strong score. Both financial practices do go hand in hand and there are many options and methods for reducing debts and making monthly payments a little easier.

One method that is popular among consumers is the choice of transferring credit card balances from one or more high interest rate cards to a new card offering an unbeatable 0% interest rate. By transferring balances to lower-interest cards, you are able to reduce the amount of interest that accrues on your balances every month. It can also help you meet your monthly payment obligations a little easier dealing with one card payment each month versus several cards.

If you have been considering applying for a card with the intention of using the balance transfer option, there are some things you need to know.

There are several things you want to think about beyond reducing your debt. While many promotional offers will state that the balance transfers do not cost anything, there can be fees associated with the transaction. If you do not research how the process actually works (ie: read the fine print), you can end up overcharging your credit limit amount thereby incurring additional fees and penalties right from the start.

Double Check the Associated Fees

Each credit card will charge a different fee for balance transfers.  The typical transfer fee is approximately 3% of the total balance that has been transferred to the new card. There used to be a of $50 and $75 cap or maximum on the fees, but no longer.

What Happens After The Promotion

Many 0% balance transfer cards are often promotional or introductory rates, meaning that after 30-90 days the promotional rates expired and reality set in. Just because you are approved for a 0% interest rate does not mean it is for the long haul. Many cards will have interest rates that exceed 25% APR once the promotional period ends. You need to know what will happens when you start charging purchases after the offer expires. Never assume that your credit card APR can not change. Read the terms and conditions carefully to know what you can expect down the road.

Check Out the Other Offers

While you are likely to get many credit card offers in the mail, promising the lowest and best rates that you have already qualified for, you want to make sure which credit card is the best for your lifestyle and financial situation. Check for other cards and use the convenient online services that allow you to compare other credit cards to really find the best offer. It is also key to remember that your credit score will suffer if you just start randomly applying to or accepting credit card offers just because you have been “approved”. Do your homework and gain a solid understanding of what else is out there.

Balance transfers can make sense provided you are prepared and have a plan to pay off your total transferred balance within the special promotional offer time limits. You can certainly reduce a lot of your debt in a faster time, if you use your credit card responsibly.

Related Posts:

• Be Wary of the Balance Transfer Game - There’s one common mistake that I commonly see people make when transfering balances among cards.  I’ve talked about making balance transfers before...
• Best Balance Transfer Card Strategy - You can still find balance transfer cards among other rewards type of credit cards being offered to consumers.  The restrictions are tighter...
• Asking for Help With A Balance Transfer - You are thinking about making a balance transfer from one credit card to another credit card. The goal of this may be...
• Review The Lender Before Making a Balance Transfer - The balance transfer is a tool that the smart credit card consumer can use to keep down the total amount of money...

This entry was posted on Saturday, January 10th, 2009 at 6:09 am and is filed under Debt & Consolidation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.