Balance Transfer Credit Cards – What To Ask Before You Apply
Credit cards that allow consumers to transfer the open balances on their other cards are heavy marketed products in the financial world. Before you apply for a card and transfer balances from one card to another make sure you understand what is involved and what you are paying for in fees.
If you do not pay attention and understand the cost associated with balance transfers in the end the “saving” could be a costly move. Answer these questions before applying for your card.
Introductory Interest Rate – Is there one and if so what is the interest rate?
Many cards you receive in the mail may offer a zero or low introductory rate on all balance transfers. This low APR rates can eliminate or greatly reduce the finance charges on the open balance each month. With a finance charge waived for a period of time it can make paying off the card balance much easier.
How longer will the Introductory Period last?
Most of the time these introductory periods and the low rates last for six months to one year. Some run for up to 15 months. The longer the intro period the better chance you have of paying off the balance before being hammered with a full finance charge.
What will the new APR be after the introductory period expires?
Go for the lowest APR possible. Knowing in the back of your mind the APR will increase after some many months can be a big motivation for paying off the balance ASAP. Balance transfer APR is usually different than the APR on purchases. Keep and eye on any purchases.
Does APR apply only to transferred balances only or are purchases at the same APR?
To attain more customers many credit card companies separate have different interest rates for different transaction types. For example, balance transfers carry a different rate from a purchased item on the card. Cash advances in urn have another APR. Read the fine print! You need to understand the interest rate for each type of transaction the card is used for.
Do You Meet the Qualifications for the Introductory Rate?
Never assume that the offer you receive immediately qualifies you for a zero percent interest rate. The final rate depends how the company views your credit history. The final rate could be much different than the advertised rate if your credit is not is the best shape.
What are the Fees Associated with Balance Transfers
The fine print will let you know if there are any fees associated when transferring the balances. The low rate could be “recovered” with additional fees. These fees could be a flat fee to transfer the balances or the fee could be based on a percentage of the amount transferred. There could be no fee on the initial transfer but fees for transfers that occur later on.
What is the default or standard rate and when does it come into effect?
The default interest rate is the highest rate the credit card company will charge for usually penalties. This includes late payments and over-limit charges. No these rates before you make your application.
Balance transfer cards can be a great way for consumers to reduce their credit card balances. Imagine only having to make one payment each month at a low interest rate. It sure makes paying off the pleasures in life easier.
