Balance transfer can be a good way to save money if done in the correct manner. Balance transfer is when you transfer the balance from one credit card on to another which typically offers a lower or 0% rate of interest. This enables you to save money. You should consider the following features before signing up for a balance from the credit card in order to make sure that the proposition is one that is favorable and not one that in fact costs you more in the long run.
Check for the Introductory Interest-Rate
A lot of credit cards that have promote themselves as balance transfer credit card offer an introductory rate of interest. This rate of interest is typically much lower than normal rate of interest and may even be nothing at all. Credit cards offer a lower 0% introductory rate of interest to balance transfers in order to win over new business from competitors. The lower interest rate or the absence of one will make it much easier to you to pay off your balance from the previous credit card.
The Length of the Introductory Interest Rate
The longer the period in which the introductory rate of interest remains active the more easy it will be for you to pay off your balance. The longer the period the more months you’ll have to divide your repayment over. Paying off the transfer balance works out the best venue paid during the time that the introductory rate of interest is in force. Once the introductory rate of interest is over you may have to pay an interest-rate which is the same or in fact much higher than in previous credit card which will defeat the purpose of transferring the balance in the first place.
The Annual Percentage Rate after the Introductory Period Is over
It is best to pay off the balance that has been transferred during the introductory interest-rate is active. However you may want to find out an advance what the annual percentage rate on the credit card is going to be after this period is over. Typically credit cards have different interest-rate for different kinds of balance. There may be a different annual percentage rate applicable for a chase and a different one for the transfer balance. Ideally you want a credit card that has a low annual percentage rate of both the balance and purchases. This way you can not only use a new credit card or the purpose of saving money on transferring balance but continue to use it in the future for purchase transactions as well.
Qualification for the Introductory Interest-Rate
While a credit card may market itself as a low percentage or zero percentage balance transfer credit card they may be certain terms and conditions which you may need to fulfill before you can qualify for the introductory rate. Make sure that you satisfy the criteria that is required in order to take advantage of the balance transfer.
Additional Charges and Fee
You may be required to pay additional processing charges and fee in order to transfer the balance on to the new card. This fees typically one to 3% of the balance being transferred. You should carefully review and judge whether the balance transfer makes sense way financially after including this be in your repayment plan. Also check out the default interest rate which is the highest interest-rate that credit card issuer is allowed to charge. This interest-rate can go in effect as a result of late payments or over the limit of transactions. You should make a note of this as well just in case there is a problem in completing the repayment plan.