Balance Transfer Credit Card Offers - What You Need to Know
Is a balance transfer credit card your ticket out of credit card debt? It can be. If you're having trouble paying off a steep balance and the high interest that goes with it, these cards could be the right solution for you. But before filling out an application, take a few factors into consideration. Educate yourself on the transfer process, and you'll get the most out of your credit card experience.
What Balance Transfer Credit Cards Are
These credit cards have a certain appeal that separates them from other forms of plastic. They offer applicants the chance to shift a balance from a high-interest card to a low-interest one. In fact, most of these cards come with an initial 0% interest period. This means you can make payments that are directly applied toward the balance. As you pay down the debt, you can save hundreds of dollars on interest expense.
How to Compare Balance Transfer Credit Cards
Many appear to be the same, but in reality they vary quite a bit. Check the following details as you sift through the options:
Length of introductory period - The initial period of no interest may be as short as three months, or as long as fifteen months. If you aim for at least 12 months of 0% interest, you'll have ample time to pay off the balance.
What the 0% APR applies to - Some credit cards offer you 0% APR only on the transfer amount. This means that you will be charged a higher interest rate when you make a purchase. Moreover, all the payments you send in will first be applied to the balance, and then to the purchases. While you pay down the balance, the new purchases and their attached high interest rates will sit and accrue on your statements. Eventually, you could pay more in high interest than you planned on. To avoid this, look for a card that offers 0% APR on both balances and purchases. Or limit the use of your card until you pay off the transferred balance.
Check the fees - Most balance transfer credit cards charge an initial fee for bringing over the new balance. This is sometimes a certain percentage of amount transfered. Banks often include a cap, such as $50 or $75, on the transfer fee. The savings you receive on interest usually outweighs this expense.
Additional benefits - While they offer you a chance to pay off nagging debt, many come with other features as well. Some balance transfer credit cards include a rewards program. Others have a low interest rate that kicks in after the introductory period. Think long-term before you apply. Consider what benefits you'll want after you are debt-free.
Using your Balance Transfer Card
These can be a solid solution if they are used properly. Think about creating a payment plan to get rid of the debt. Set aside money each month for card payments. If at all possible, pay off the balance before the introductory period runs out. As the balance dwindles, you'll gain control of your finances. You'll also begin to build a stronger credit history. When the balance is gone, you'll be able to enjoy the card's additional benefits.