Don't Take Balance Transfer Credit Cards at Face Value
Transferring the balance from one credit card to a lower interest rate card is a smart move, but watch out for any hidden fees in the process. First of all, consider your credit score. If you have proven to be a responsible consumer, applying for a balance transfer offer should be simple enough. If you have poor credit, qualifying for a 0% interest rate credit card may not be possible. In that instance, look for the lowest interest rate possible for which you can still qualify.
Know the advantages of a balance transfer. The main perk is that you can significantly reduce your current interest rates and credit card fees. Since most companies offer 0% interest during an initial trial period of up to twelve months, many people choose to transfer balances after the 0% interest period is up. Most balance transfers come with a transaction fee which could be waived in the event of a special offer. It may not be worth the effort to transfer small balances because the fees may offset the potential savings.
Be aware of any over-the-limit or late fees. These can add up to be more than your current card’s interest rate. Some companies also charge lost card replacement fees, regardless of whether you lost your card or had it stolen. Compare credit card APR percentages, interest rates and rewards at websites such as Money Supermarket. Make sure you are comparing credit cards on an independent site that’s provided with no strings attached. After a balance transfer, cancel the old credit card. Not doing so could result in using it in an emergency or even on a spur of the moment shopping trip and that temptation is simply not worth it.
Figure how much money you will have to pay per month to get your balance down before the 0% interest rate expires, then pay that amount. Doing so will ensure the balance is paid in full before the interest rate goes back up. These credit card companies are actually hoping you will charge new items on the brand new card so the balance will remain past the 0% interest period. Realizing that most people fall into this habit, they know they have the potential to make money off you. Since most people will charge more on a 0% interest card than they would on a higher interest card, you could end up with a higher balance after the end of the 0% period. Read those terms and conditions very carefully before transferring your balance. If you don’t fully understand certain terms, call the provider’s customer services for a more detailed explanation.
As with any credit card, make a habit of paying more than the minimum monthly payment. Those minimum payments serve to make the credit card company as much money as possible, so take your financial matters into your own hands. Once you have compared those introductory 0% credit cards, ask yourself if they truly are a better deal than your current card and go for the smart option.
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