Here is a series of common questions that you should ask yourself before you make a credit card balance transfer. A credit card balance transfer is usually done to take advantage of a low interest rate on a Balance transfer credit card.
This interest rate is usually a promotional rate of interest that ends after a certain period of time. Consider the following things to determine that a credit card balance transfer is a profitable step for you to take.
· Does the balance transfer credit card have enough available credit limit? If the credit cards that you’re transferring the balance to a stand already existing credit cards that you have then you might need to reflect whether you have enough credit limit on that card to support the balance from another card. Increasing the balance on one credit card too much might increase your credit utilization ratio which is bad for your credit score. However if you are signing up for a new credit card offer echoes it offers a good credit card balance transfer interest rate then that you are likely to have sufficient credit limit since you will be starting with a zero balance.
· What are the terms and condition of the balance transfer credit card?
You will also need to consider the qualification terms and conditions of the low interest rate. Several credit cards promotional offer that offer a low introductory rate for a credit card balance transfer requires you to qualify for that interest rate. These conditions could be depended upon the amount of balance that you’re transferring and the information current on your credit file. Make sure that you fulfill the terms and conditions and qualify for the low introductory rate of interest before you transfer your balance to the card. Transferring the balance before finding that you actually qualify for a low interest rate might result in you getting a similar or even a higher rate of interest which will make the fact is off transferring the balance completely and useless.
· What is the promotional rate being offered on the balance transfer credit card?
You need to know when the promotional rate of interest will end on the credit card. Usually it is the most beneficial to pay off the balance during the duration that’s the promotional rate of interest is in practice.
If you are going to take longer than the duration for which the promotional rate of interest is active then you will be paying the regular interest rate on the credit card once the promotional period is over. This will have a great impact on how much money you save in the long run are doing a credit card balance transfer.
· How Long Is It Going to Take You To Pay down the Balance Once You Transfer It
By planning this in advance you will know exactly how much potential there is a savings the money during the introductory rate of interest is active and how much you will have to pay when the normal rate of interest is in force.
· How Much Money Are Going to Save by Doing a Balance Transfer
By considering all these factors are you have to do issued calculation of how much money you are going to save by doing a balance transfer. A balance transfer does not come without its costs. Usually a typical cost of a balance transfer is one to 3% of the balance being transferred. Apart from that, the new credit card might have annual fee and other charges that you might have to pay. If you are planning to carry the balance beyond the promotional period onto the regular interest rate period then you will need to calculate whether you are going to save money in spite of paying the regular interest on the credit card not.
· Does the Balance Transfer Credit Card Already Have a Balance on It?
The reason why you need to consider this question is because sometimes a credit card can allow different kinds of balances to exist such as purchased balance, credit card transfer balance etc. Typically whatever the payment you make towards the credit card is first adjusted to the balance that has the lower rate of interest. This means that if you have a purchase balance as well as a balance transfer balance on the same credit card, the payments that you make will go towards covering the purchase balance, which is likely to have a lower rate of interest. Till the time your payments have completely paid off the purchase balance you’ll continue to accrue extra interest on the balance transfer which may make it and expensive proposition in the long run.