Balance transfer is one of the options that many people would consider when they are flooded with mounting credit card debts in their hands. It could be another burden on the shoulder if it is overlooked or not scrutinized thoroughly beforehand. There are things to consider such as higher rates than before, balance transfer fees, and expensive rates for initial purchase. Also contrary to what they originally offered, lenders tend to offer a higher rate product when the final decisions are made at the end. Such a changing situation will get the customers frustrated and make them give up in a desperate mind.
But with all those gray area of aspects, balance transfer could be helpful when you need to get out of credit card debt if used correctly. The most important key point is that you would need to focus on using the low rate in order to help yourself pay off the balance, and no more. For the rest of case, you don’t want to use it as an excuse to continue carrying out your debt no matter what the situation is. Your main goal is to pay off your balance as much as possible before the low rate comes near to expiration. For example, with $3,000 balance at zero percent interest, you will need to make a monthly payment of at least $485 to pay off the balance in six months those offers typically last. At 4.99%, you can boost your payments to $490.
In addition to it, here are some precautions you would want to take:
If you think you can not pay off your balance prior to the introductory rate expiration, you might need to consider shopping around for a card with lower and fixed rate. Even if you can not guarantee the fixed rate, at least you know that the other card will have rate increase. Also you won’t know where you will be able to get another great balance transfer offer when it is available.
Mark down a good rate when you see one
If your credit score is about 720 and more, then you have a good chance of getting qualified for the rates under 10%. If it is mid range – about 650 – then you still have fair chance of getting pretty good deal, although the introductory rate may be lower. Check out your credit score and know what your situation is.
Watch the fine print
When you receive the new credit card, find out exactly how long the rate will last and when it will expire with current low rate. Also mark the date on your calendar as soon as the cards are in your hands, otherwise you will forget. Try to avoid any offers that only apply for a few months and the rest will be upon lenders own discretion. Or any lenders who reserve the right to send you a higher rate card if you are not qualified for the low rate offer initially. They tend to give you much higher rate after all those initial sweet deal offer.
Know the fees
If the new credit card company charges a fee for the balance transfer as part of your debt consolidation strategy, make sure you will be able to save enough during the low rate period to offset the additional charge incurred. Otherwise there is no point of doing this balance transfer after all.
Keep another card for purchases
With the new low interest card, you can have power of purchasing and transfer, but remember that any balances you owe will start accruing interest at much higher rate, when the introductory rates expire which will happen eventually. So it would be better to have a separate credit card for any new purchases, and keep paying off those balances in full every month.
If you are considering a credit card debt consolidation, then a balance transfer might be an option for you. It can help you lower your interest rate on the card and move out of imminent debt situation if used well.