8 Questions That Everyone Needs to Ask Prior to Making a Credit Card Balance Transfer
Balance transfer promotions hold some advantages, such as enabling you to reap the benefits of a reduced rate of interest. However, they also involve some disadvantages, such as the balance transfer fee and probably a yearly fee. To make certain you're obtaining the most on a balance transfer, look for the answers to these eight questions before you decide to transfer your own credit card debt to a new credit card.
Have you got a credit card with available credit on it?
When you attempt to transfer a balance to a credit card that does not have an adequate amount of credit, you could potentially find yourself exceeding the limit. This could cause over-limit fees and can even activate the default rate of interest on your account.
Are you eligible to get a promotional rate?
Even though you get a pre-approved offer to get a low introductory balance transfer interest rate, this doesn’t mean you really qualify for that rate. You typically need to have an outstanding credit score to obtain a low balance transfer rate of interest. It's best not to make any assumptions. Talk to the card issuer to determine what you need to do to obtain the ideal interest rate.
How long does the promotional offer last?
Beginning February 22, 2010, any promotional rate of interest must last no less than six months. Till then, card companies can set the promotional rate at whatever they want. Before you decide to move your balance, be sure to know when the promo rate will end so you’re not caught off guard once the new rate becomes effective.
Just what exactly will the post-promotion rate of interest be?
Once the initial rate of interest comes to an end, your normal balance transfer rate of interest could go through the roof. In the event you have not yet paid off your balance transfer, your monthly finance charges increase. They can also be greater than they were prior to you transferring.
Just how long could it take you to pay off the balance?
Have you got a plan to pay off your balance transfer? Or will you just be moving the balance because you would like to get yourself a low interest rate for a few months? Transferring a credit card balance is best if you can pay the balance off inside the promotional period. In the event you can’t pay it off that soon, make an effort to pay it off soon after the promotional period ends. The longer it will take to repay your balance transfer, the greater you’ll pay in interest charges.
Will the balance transfer help you save money?
Do not presume that your low introductory rate of interest will mean you’ll save money overall. You've still got to repay the balance transfer fee and any annual fee charged by your new credit card. You should utilize a balance transfer calculator to see whether you’ll in fact save money by transferring your credit card balance.
Does the new credit card currently have a balance?
If you are transferring to a credit card that already shows a balance, it might actually take you longer to pay off the balance transfer. Credit card companies these days apply any above-minimum payment towards the balance that has lowest interest rate. That could work to your benefit for those who have a promotional rate. However, it'll work against you should your balance transfer have a higher interest rate. As of February 22, 2010, credit card issuers are going to be forced to apply above-minimum payments to balances with higher interest levels which will help you save money.
How substantial will your credit utilization be following the transfer?
Your credit utilization impacts 30% of your credit rating. Should the balance transfer result in a credit card balance that’s greater than 30% of your respective credit limit, your credit rating might take a dive. Before you decide to transfer your current credit card balance, check to make certain your credit rating won’t be damaged. The good news is your higher credit utilization will probably be corrected as you pay off your credit card balance.