Credit Card Balance Transfer Tips

The Secret of Balance Transfers
It has been said that balance transfers can be they key to paying credit cards quicker and more efficiently. With the hundreds of offers flowing in from credit card companies on a weekly basis offering 0% APR for up to one year to customers that transfer their credit card balance, many customers wonder if balance transfers are truly worth it?

If used correctly, balance transfers can save hundreds of dollars through accumulating interest payments, but balance transfers have some warning signs, complications and stipulations that every customer should be aware of.

First, determine the fees that come with the balance transfers. Most credit card companies have a standard fee of 3% implemented for balance transfers. This means that the card holder is going to be charged an additional 3% of the amount that is being transferred to the credit card as a type of “convenience fee”. When deciding if a balance transfer is right for you, it is important to calculate the fee into the debt repayment budget to determine if it is feasible.

Next, determine the length that the no interest offer is going to be extended to the customer. For most credit card companies, these offers range from six to twelve months.

There are three common mistakes that people make when making a balance transfer that cost the card holder money rather than saving money. Making a late payment or missing a payment altogether is a mistake that is often made. There are clauses within the balance transfer agreement that allow the credit card company to increase the interest rate from 0% to upwards of twenty percent if this happens.

The next mistake that people make when using balance transfers to manage credit card debt is not budgeting to pay the complete total within the introductory 0% APR. After the introductory rate, depending on your credit rating – this interest rate can increase to the highest tier that the credit card company offers. When this happens, you don’t want to be carrying a balance on a card.

Next, customers don’t factor in the fee that is going to be accrued in addition to the balance that is being transferred. Consider a balance of $10,000 being transferred to a 0% APR introductory rate, the fee for this amount would be $300.00, which could be equal to one monthly payment. Is this fee lower than the amount of interest that would accumulate on the original credit card?

Taking all of these aspects into account, you are ready to make an informed decision to whether a balance transfer is appropriate for your situation. Using these tips, tools for lower interest rates and adequate budgeting skills, a balance transfer can be a great way to expedite the repayment of your credit card debt.

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