What You Need To Know About Credit Card Balance Transfers

Introductory Rates

Credit card issuers, to get your business, typically offer attractive promotional deals to get you to transfer your credit card balances to their card. Promotional deals usually consist of 0 percent annual percentage rate for six months, a year or even 18 months. This allows you to apply money you normally spend on interest payments to your balance instead. For example, if you owe the national average of $7,000 in credit card debt that you want to pay off in 18 months and you pay 12.5 percent APR, you would actually pay $7,713.04. If you transferred that balance to a card with 0 percent APR, you would save 713.04.

APR

Ideally, you would pay the balance off during the introductory period. But, if you can’t do that, you should pay attention to what the APR becomes when the introductory period ends. If the APR on the balance transfer card will be greater than what you are already paying in interest, that card might not be the best deal for you if you expect to carry a balance for a long time.

Fees

You also need to consider fees. You are often charged a fee when you do a credit card balance transfer, often about 3 percent of the balance transfer, so if your balance were $7,000, you would be charged a $210 fee. If you think you won’t pay the balance off during the introductory period where you pay 0 percent or a low percent APR, you then might be paying interest on the fee you were charged in addition to the leftover balance. In that case, the balance transfer card might not be a good deal for you.

When to Apply

Apply for a balance transfer card if you decide that the numbers work in your favor. Keep in mind, however, that you still need to qualify. You typically need a decent credit score to qualify for the card, and you might need a FICO score above 700 to get the best introductory rates.

More Information You Should Know

If you picked a card and were then successful in obtaining it, there is even more you need to know. For example, your balance doesn’t automatically transfer to the new card. The time it takes varies. While you are waiting, make sure you don’t miss any payments on your current credit cards. You can hurt your credit score if you do. You also need to understand what balance transfer checks are, what people often use their balance transfers toward and whether you qualify for rewards cards perks. You can learn about all these issues on this website.

Food for Thought

A credit card balance transfer could be the best option for you. But, before you decide, you need to learn the ins and outs of these cards. After all, you want to put yourself in a better situation if you use one, and that requires some understanding of how these cards work. Armed with the right information, you should be well on your way to controlling your credit card debt instead of having it control you.