A Better Balance Transfer
If you are one of the many people looking for ways to lower your monthly expenses, then transferring your credit card balance to a card with a lower interest rate may help.
While there are many credit card deals to choose from, finding a good one may take some work and careful reading.
Many major credit card issuers are offering introductory rates as low as zero percent that last five to nine months on balance transfers. These are called teaser rates because they are just a tease to get your attention and get you to sign up for the card. Some cards even go so far as to offer the deal for a year. Of course, not every credit card customer is offered promotional rates this low. Just because a card offers a great percentage on balance transfers doesn’t mean that you will get that percentage when you sign up. Be sure to find out exactly what terms you personally qualify for before you sign anything.
Even if you qualify for an offer that’s low, you need to make certain that you read all of the fine print. For one thing, it’s important to realize that it usually only takes one late or missed payment for the card issuer to raise your interest rates. Pay late one time on some cards and the zero interest rate gets replaced with rates as high as 28.49 percent rate. You also need to be cautious about new purchase promotions. Some cards will reward you for transferring balances by offering super-low introductory rates on any new purchases you make with the card for a set period of time. What they don’t make such a big deal out of mentioning is that you will be charged a fixed annual percentage rate after that, as well as on your actual balance transfers. The rate varies from card to card according to the details of the deal, but as they say, the devil is in the details. Be sure to read them.
Some other credit card issuers will simply promise to hold a steady rate, such as 8.9 percent fixed APR, on transferred balances and the same for any new purchases for a set period of time. As good as these deals may appear, there are still many reasons to be cautious.
Some of the penalties on low-rate cards are severe. Many companies will charge a transaction fee for transferring a balance to their card. Several issuers who offer low rates on balance transfers also charge fees of 3 to 5 percent for accepting their offer. A four percent fee on a one thousand dollar balance would cost you forty dollars, and most issuers will charge these fees as soon as a balance is transferred onto a card. Such fees are often referred to as hidden fees, because while the low rates are well-advertised, you only find these fees in the fine print - and on your bill.
Once you’ve decided to accept a card offer for a balance transfer, you will need to start the actual balance transfer process. One thing to keep in mind is that it’s important to continue making minimum payments on your old card while you are waiting for a balance transfer to take effect. This could take as long as four weeks. While you will eventually want to close off old credit lines, don’t do so until you are certain that the balance on that card has been paid in full, or you may be hit with high penalties from your old credit card.
If you do find a low-interest credit card deal and successfully transfer your balance onto it, you may suddenly find that for the next few months, your credit card payments are suddenly cut in half. Use the money you save to build up an emergency fund or pay off other debts instead of treating it like extra cash in hand.
The best way to actually free up more cash in the long run is to eliminate your credit card debt. You need to continue to pay as much as you can on your credit cards. You should also adjust your spending habits so you can avoid running up another huge credit card balance in the future. It’s simply a question of learning to live within your means, which means within your budget, and not simply within your credit limit.