9 Things to Understand about Balance Transfers
February 13, 2017 Francine Jones 0 Comments
Are you paying off debt with a high interest rate, or multiple debts? One way you may be able to save money and simplify your payments is a balance transfer. Here are nine things you should understand before trying a balance transfer:
1. You’re Paying One Credit Card with Another
When you do a balance transfer, you’re using one credit card to pay your balance on another credit card. You won’t be able to transfer other types of debt, such as loans, and you also may not be able to transfer balances between cards issued by the same bank.
2. It Allows You to Consolidate Your Debt
One reason to use balance transfers is to consolidate your debt so you’re only making one payment. This makes it less likely that you’ll miss a payment, and you could end up having a lower minimum to pay every month.
3. Lower Interest Rates
Consumers typically transfer balances to pay less in interest charges. There are many 0-percent APR credit cards that are popular choices for balance transfers.
4. Low Interest Rates Are for an Introductory Period
Keep in mind that 0-percent APR credit cards only have that interest rate for an introductory period, after which is increases. Introductory periods may be anywhere from 6 to 18 months, but 12 months is the standard length of time.
5. Missing Payments Could End That Introductory Rate
It’s crucial that you make all your payments on time with a 0-percent APR credit card. Missing one or paying less than the minimum could result in the interest rate going up immediately.
6. Watch Out for Balance Transfer Fees
Balance transfers typically have a fee, which is a percentage of the amount you’re transferring. Many 0-percent APR credit cards will also offer balance transfers with no fee for an introductory period.
7. New Purchases May Have a Different APR
Even if balance transfers have 0-percent APR, that doesn’t necessarily mean new purchases will, as well. To avoid any complications, try to avoid using that credit card for any new purchases until you’ve paid off the transferred balance.
8. You Need Good Credit
Card issuers only offer their lowest interest rates to applicants with high credit scores. If you want to get a 0-percent APR credit card for your balance transfers, make sure you have good credit before you apply.
9. Don’t Try Repeat Transfers
You could conceivably keep opening up 0-percent APR credit cards and transferring your balance each time your introductory period ends. However, this can negatively impact your credit score, and it’s likely that card issuers will decline you when they see that you’re trying to open new accounts while carrying high debt.