Balance Transfers and What You Need to Know

Many consumers have read about tips to improving their credit score and techniques for reducing their debt. One popular alternative is transferring debt from high-interest credit cards to a new card with a 0% interest rate. Transferring balances helps to reduce the amount of interest you accrue on an unpaid balance, therefore reducing your expenses each month. While this method may work for some, there are certain things to consider when you choose the balance transfer option.

Balance Transfers Require Consideration

The first thing to consider when transferring a balance to a low or no interest credit card is the amount it will cost you to do the transfer. Some people may be surprised to learn that there is an additional fee associated with the transfer and if you are not careful to read the fine print, you may end up with more charges than you expect on your new card.

This is especially important if you are transferring over a large balance and the additional fees put you over your credit limit. If this is the situation, you are actually harming your financial situation instead of improving it and will face additional fees for going over the new credit limit. It is important that you read the fine print each and every time, even before you apply for the card.

Many cards charge around 3% of the total transferred balance, with a limitation between $50 and $75. Just because there is a fee, doesn’t necessarily mean you should forget the idea of the balance transfer because the process may actually help to improve your credit and reduce your overall debt. It is just important to be in the know and weigh the pros and cons.

Check Out All Interest Fees and Charges

Secondly, it is also imperative that you know what your interest rate will be after the introductory period expires. Some consumers are attracted to the initial 0% rate but fail to look down the road to when the offer expires and they are left with a high interest rate. It is also key to look at all of the rules for the card. Many times the balance transfer rate is 0% but the rate for all new purchases is marginally higher. Do not just assume that because one interest rate is low, there will not be another level for determining interest charges and fees.

Do Your Research

If you are looking for a good credit card that will work favorably for transferring high balances, it is best to do your research and take the time to compare different credit cards and companies. Do not just apply for every offer arriving in your mailbox, no matter how tempting it may be. Applying for too much credit will have a negative impact on your credit score.

Tisha Kulak is a writer for Creditorweb.com, where she writes about credit card offers