How to take Charge of your Balance Transfers!
For those folks who find themselves buried under a mound of credit card debt, the idea of a balance transfer can seem like a gift from heaven, and sometimes, that’s exactly what it is. But other times, a balance transfer can seem like a merry-go round that just isn’t very merry. Some balance transfers seem like great ideas at first, but before you know it, you’re right back on the same path you were before, and you’re left to wonder what happened. Here are a few quick and easy steps you can take to make sure that the next time you go to transfer your balances, you do it right!
Check and then double check the amount of time the introductory rate lasts. In almost all instances, balance transfers come with low, introductory rates. But the key word here is introductory. The low rate, usually 5 percent or below, sometimes even 0 percent, only lasts a short while. The intro rates on cards usually vary from three to six months and then the rates rise to whatever the rate will be for the rest of the time that you have the card. Sometimes, the rates can be just as high if not higher than what you were paying before, so unless you can take a significant bite out of your balance during that introductory period, its really not worth transferring you balance at all.
Another catch you need to look for is what the low, intro rate really covers. For most cards, they have one rate for everything, including new purchases and balance transfers. But a new trend is immerging in recent years that sees a split interest rate. Now, the intro rate on most cards only applies to the balance you are transferring over, not to any new purchases. This can mean the a difference between a few hundred and a few thousand dollars in extra interest payments. Make sure you know what your new rate applies to before you go out and enjoy your new card.
You should also look out for balance transfer fees. Many low-end cards charge a fee, usually between 2-4 percent of the total amount you are transferring, with a maximum fee of around $50. Now, a $50 fee isn’t that bad if you figure you can save thousands with a new low, fixed interest rate, but some companies have begin zapping their cap and charging a fee of whatever 2 or 3 percent of the total amount transferred is. Your small, manageable fee has just grown into a monster. Think twice about transferring balances to a card with a transfer fee, and don’t even consider it if it doesn’t have a cap. There are many other fish in the sea.
One of the biggest scams to come out in recent years is to tell you that you will have a low 1 or 2 percent interest rate, and then they change their mind, citing things like a bad credit score or some other nonsense. Make sure the low rate that you are being told is, in fact, the rate you are going to get before you transfer your money over.
Balance transfers can be a scary proposition for folks who feel they might be taken advantage of. But if you are aware of the current scams that are out there and you are armed with the right information to ask the right questions, balance transfers can be a breeze.