Credit Card Balance Transfer Advice
How do you know if a balance transfer is the way to go when you are facing large amounts of credit card debt? For some customers, a balance transfer achieves a lower interest rate, even introductory rates where the card accumulates no interest for the introductory period of six to twelve months.
There are many advantages to using balance transfers, such as; many credit card companies offer introductory rates of 0% APR for periods of six, twelve or even eighteen months. This allows the debtor to pay funds directly to the principal of the debt, while interest payments are suspended through this period.
Many customers aren’t aware of the caution that must be taken when balance transfers are completed. The majority of credit card companies charge a 3% balance transfer fee on the amount that is being transferred to the card. This could be considered one of the disadvantages of a balance transfer, as depending on the amount that is being transferred, it could be equal to one monthly payment, therefore should be factored into the repayment budget.
If you are considering a balance transfer you must be willing to pay the minimum monthly payment, on time, each month. As little as one late payment towards the credit card could mean the introductory rates become void, therefore the default rate is applied to the card. If you read the fine print when completing the balance transfer contract, this can be up to twenty eight percent. This amount is often higher than the interest of the account the balance was transferred from, reiterating the point that it is essential to pay the monthly minimum payment.
Planning is essential when completing a balance transfer. To make the most of the offer, the balance should be paid in full before the introductory offer expires. A budget should be created to allow for the monthly payment, to enable the debtor to make equal monthly payments which will eradicate the debt. After the introductory period, when interest rates are increased – the minimum monthly payment is liable to become increased as well.
Should you close the credit card account that the initial balance has been transferred from? Experts recommend keeping accounts open, if they have a longstanding history with the client. This will help to maintain the credit score, as a portion is calculated using the history of accounts as well as provide future use. Opening multiple accounts can decrease this history, therefore opening new accounts should be limited, and multiple accounts should never be opened at one time.
How do you choose a balance transfer credit card? Searching for a credit card with no annual fee, rewards opportunities and introductory rates is easy. Credit card companies want your business, especially if you are transferring funds – use powerful internet tools that allow you to compare card interest rates, rewards and introductory offers to find the card for you.