A balance transfer involves transferring one credit card or loan debt to another credit card or loan balance. Many credit card companies are using balance transfers to get new clients by offering extremely low annual percentage rates (APRs) for new clients to transfer credit card debt.
Credit cards can be confusing, especially when you get intocomplicated topics such as balancetransfer credit cards. A balance transfer involves transferring one creditcard or loan debt to another credit card or loan balance. One of the reasonswhy balance transfer is so attractive is that you can consolidate all of yourdebt onto one credit card. In fact, many credit card companies are usingbalance transfers to get new clients by offering extremely low annualpercentage rates (APRs) for new clients to transfer credit card debt. But whendo balance transfers actually pay off?
In order to find out if a credit card balance transfer willbe beneficial to your particular situation, follow these tips:
- Find out how much the new credit card will charge for a balance transfer. While some credit card companies don't charge for balance transfers, it's extremely rare. The typical is a 3-5% balance transfer fee, which can be costly if you have significant debt to transfer.
- Compare the APRs of your current credit card and the new credit card you're considering transferring your balance to. If your current card's APR is much higher than the new card's APR, it may be worth it to transfer your balance.
- Find out what the grace period is before your introductory APR offer ends, and ask what the new APR would be after that grace period. The longer the grace period, the better the deal.
- Calculate how much interest you're currently paying each year on your current card's balance. To do this easily, look at your last statement and find the interest amount you paid. Now multiply this by twelve. Now calculate how much interest you would be paying with the new card, and compare the two. Which one will cost you more?
- Take the APRs, the annual interest paid, and the balance transfer fee into consideration—does it make sense to transfer your balance in the long run, or will it be costing you the same amount or more?
- Double-check everything before you make a decision! Read all the fine print, and be sure that you fully understand what you're committing to before initiating a transfer balance.
- Before you sign on the dotted line, call your current credit card company's customer service. Inform them that you're considering transferring your balance. You never know—you may be able to get a lower APR. But be careful—don't get caught up in any other offers. Stick to talking about your interest rate.
If you're considering a credit card balance transfer, besure to keep everything covered in this article in mind. Remember to read thefine print and double-check everything before agreeing to a balance transfer.Knowledge is power, and that goes doubly when it comes to your credit andfinances!
Katrina Robinson is a freelance writer and editorbased in Charleston, South Carolina. She writes about a widevariety of topics including health, fashion, finance, and credit cards.