Eliminating high interest credit cards by transferring to a card with a
lower rate can help you save a great deal of money, allowing you to regain
control of your finances. However, it is important that you understand all of
the terms and conditions of your new credit card before committing enrollment.
You want to make certain that the card offer is fair and that you are truly
going to benefit from it. Featured are tips that will help you choose and use
the right credit card for transferring balances.
Pre-determining interest rates
Most balance transfer offers are good for only the first 6-9 months of
enrollment. At the conclusion of the introductory rate, the card will convert to
a more standard rate, typically between 14-20%. It is important that you
determine what the interest rate is going to be once the intro rate is over. If
you are not sure what interest rate the card is going to be charging at the
conclusion of the intro offer, call the issuer and find out.
New purchase interest rates don't equal the balance transfer rates
The intent of transferring credit card balances is to obtain a lower
interest rate and eliminate your debt quicker. It is important to note that the
balance transfer interest rate is not going to be the same for new purchases
made with the credit card. In fact, new purchase rates are going to be higher.
Also, payments that you make towards your credit card bill are going to be
applied towards the balance transfer debt first, until they are eliminated. As a
result, you are going to end paying a lot of money in interest costs for new
purchases. It would be wise for you to pay off all of your balance transfers
prior to making any new purchases with your credit card.
You should also be aware that many issuers will apply the introductory rate to
new charges only. Therefore, you will end up paying the full standard interest
rate on your balance transfers, defeating the purpose of saving money while
eliminating your debt. Obviously these type of card offers are not ideal
for balance transfers and should be avoided.
Know what fees are associated with transferring balances
It is very likely that you are going to be charged a percentage when
transferring credit card balances. This fee is usually 4-5%, with a $35-50 cap.
Unfortunately, many credit card issuers have decided to eliminate the cap;
resulting in consumers having to pay hundreds of dollars when transferring $1500
or more. Even worse, this fee is often considered a new purchase, meaning you
pay a high interest rate for this portion of your card's balance. Therefore, you
should look to apply for a credit card that offers caps on balance transfer fees
Be alert of bait-and-switch schemes
Offers are not always what they seem. Suppose your credit score is 550. It is
likely that when you submit a request for a particular card offer, that the
issuer presents you with an offer that is geared more towards people with bad
credit. Specifically having a higher interest rate and no introductory offer.
You can get approved, and not even be informed that the approval is for a
different credit card. You probably won't even realize until after you receive
your first statement. Therefore, it is crucial that you read the terms and
conditions of the card you are approved for before you transfer any of your
balances, or make any new charges.
Don't be late on your payment
It does not matter if you are one day late or ten days late. Being delinquent on
your payment will result in you losing your introductory offer!