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Carrying a large balance on a high-interest credit card can make it nearly impossible to get out of debt. Many people use balance transfers to help them regain control over their credit card debt, especially when the transfer offers come with extremely low interest rates.
Before you decide to if a balance transfer is worth it, make sure you get the following three pieces of information. They’ll help you choose a good offer while avoiding scams.
Credit card companies often use promotions to attract new clients. For instance, a credit card might offer you 0 percent APR on a balance transfer. If you currently have a high-interest credit card, taking advantage of a balance transfer promotion could give you an opportunity to get out of debt.
Keep in mind that promotions only last for limited amounts of time. How long promotions last vary significantly from card to card. One bank might give you 0 percent APR for 15 months, giving you quite a bit of time to chip away at your debt. Another bank, however, might only give you 0 percent APR for three months, which doesn’t give you much time to get ahead.
Once a balance transfer promotion ends, your new credit card company will start charging you interest. Unfortunately, the 0 percent APR period doesn’t last forever.
You need to know your post-promotion interest rate before you choose a credit card. Most companies will charge you somewhere between 13 and 26 percent. One credit card company in 2010, however, shocked borrowers when it started charging 79.9 percent APR.
Obviously, you should stay away from credit card offers that charge extremely high rates. Even a moderate rate, however, may not help you get out of debt. If the new card’s rate is higher than your current card’s rate, then you may not see many benefits from switching.
Banking institutions make a lot of money by surprising clients with unexpected fees, so you should get detailed information about any fees connected to transferring your balance and using a new credit card.
At the very least, you can expect to pay 3 to 5 percent on the amount of money that you transfer to the new card. Some cards don’t charge balance transfer fees, but most do.
Your new credit card provider may also charge an annual fee. Ideally, you want to find a card that doesn’t charge any annual fees. If you’re going to pay a fee, though, you should at least know about it before you open your account.
Also be sure you know how a balance transfer may or may not affect your credit score.
A balance transfer could make it easier for you to lower or eliminate your debt. Before you accept any offers, though, you need to get the details. When you’re ready, check out our list of the best balance transfer credit cards.
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