Fees for credit cards that are too high are keeping you up at night? Balance transfers could be a smart way to solve a short-term problem. This article can be used as an introduction to balance transfers and a primer on how to use them. It talks about the details of how balance transfers work. Get a credit card with a lower interest rate that lets you move a balance from one card to another. But make sure you read the terms and conditions of the new balance transfer card to make sure you win in the long run.
If you don't want a new card, tell the company you already have that you want to move your balance to a card with a much lower rate. You might get a better deal from the credit card company you already have. If not, feel free to call the other company.
So why are balance transfers so great? By moving your balance to a card with a lower rate, you can save a lot on interest and fees. The most common interest rate that companies offer for balance transfers is 0% for 3 to 12 months. If you're lucky and have good credit, you might be able to get a credit card with no interest on purchases and balance transfers for a year. Be aware, though, that the introductory annual percentage rate (APR) on some cards is tied to the billing cycle of the card.
On your balance transfer card, you might also be able to get the following:
- Discounts from some stores, protection against identity theft, and even car insurance can be added.
- You might be able to get rewards like cash back on purchases.
- The time before you have to pay could be longer.
- Your new card might not cost you anything every year.
Where can I find one?
For a balance transfer, you will need to go through some basic application steps and fill out some paperwork. After getting approved for the card, you could write a balance transfer on one of the convenience checks that the card issuer gives you. These work just like regular checks, but there are some things to keep in mind, like when they expire. With the old interest rates chasing you, time can cost you a lot of money. How much you can move will depend on how much credit your new card gives you.
Balance transfers have fees that are similar to cash advances, but fees are often waived for the best card offers. If the card has transfer fees, it's best not to transfer small balances because the transaction fees might cancel out any savings you might have made. Some of the possible extra fees for these cards are:
- Late fees: Once your balance transfer's introductory period is over, you'll have to pay interest on the remaining balance. The late fees for these cards are especially high. Make sure you mail your payment well before the due date so you don't have to pay these huge fees. If you use an ATM to deposit money, make sure you know how long it will take to process your payment. For example, banks may charge a flat fee, like $10 or $15, or a percentage, like 5%, of the minimum payment due.
- Fees to replace a lost card: If you lose your card, some banks may charge you between $5 and $10 to get a new one.
- Fees for going over your credit limit: If you charge more than your credit limit, the bank can charge you a fee. There's a chance that, in addition to interest charges, many of these fees could come due at the same time during the same billing period! Most banks charge $10 or $15, or up to 5% of the amount that went over the limit, for this fee.
The most important thing to remember about balance transfer credit cards is to make all your payments on time and pay off the outstanding balance within the introductory time frame. Balance transfers usually don't come with a grace period, and if you didn't get an introductory 0% APR, interest will start to build up right away. The math can be a little tricky at times. When you make your first payment, it will first go toward paying off the amount of the balance transfer. Only then will it go toward any outstanding balances from recent purchases. So, if you want to avoid this mess, keep one card for balance transfers and another for regular purchases.
When the Fun Stops
You should pay close attention to the date that your promotion ends. When it's over, you'll be charged interest at the normal rate. All remaining purchase and balance transfer amounts will have an APR and finance charges that are much higher.
Your post-introductory APR on your balance transfer credit card will be based on how good your credit is. So, if this APR is higher than the rate on your old balance transfer card, carrying a balance from month to month could cost you more in finance charges if this APR is higher. Just make sure you move your balance to a new card that has both a lower introductory rate and a lower APR.
