Should You Transfer Your Credit Card Balance?

Posted on Friday, October 16th, 2009 at 5:41 pm in General Payday Loan Tips

You receive an offer in the mail from a credit card company for a 0% balance transfer. It certainly looks attractive, so should you take it? Maybe, maybe not. This might have been an easy decision a few years ago, but these days you have to be careful. With fewer offers around now, along with higher fees and shorter introductory periods as well as the new federal credit card regulations, it’s harder to know if you’re making the right move.

Until recently, you generally had to pay 3% of your balance if you transferred your credit card balance to another card, for instance to get a lower interest rate. Some issuers have now raised their balance transfer fees to 4% or even 5%, while others have removed the cap on balance transfer charges, which typically used to be limited to $50 or $75. In other words, if you transfer a $10,000 balance, you might now be charged $400 or even $500.

You can still find better deals than that, but you’ll have to put in some effort. Here are some ways to ensure your new card is the right one for you:

Visit online credit card forums: Look for comments about the credit card issuer you’re thinking of transferring to. In particular, pay attention to postings about balance transfers.

Check the fine print: The card issuer might advertise a 0% introductory interest rate for the first 12 months, but you won’t know that it only applies to applicants with credit scores above 720 unless you read all the notes at the end of the credit card agreement.

Know the APR on new purchases: While you might get a preferential interest rate on the balance you transfer, anything you charge after that will have a higher interest rate.

Think about whether you need to close your old card: If holding on to it means you’ll be tempted to go on a shopping spree, maybe you should close your account. But it could be useful to keep it open, especially if you only use it for small purchases and pay them off every month.

Be aware that card terms can change: Although it’s harder for credit card issuers to alter the conditions in the first year, they do sometimes spring changes on their customers. For example, many cardholders recently saw their minimum payments jump from 2% to 5% of their balance. So you should always build in a bit of a safety margin and only sign up for a card that won’t stretch your budget, in case the costs go up. Also, remember that if you miss a payment, your interest rate is likely to rise for all future purchases.

Don’t be afraid to ask: When you’re speaking to a card issuer’s customer service representative, they’ll be keen to tell you all about deals they’re promoting at the moment, but they might not want to talk about other options. Start with a good idea of what you want, and keep asking about their company’s products until you find the card you’re looking for.

If your credit card balances become too high, remember you can always apply for a Cash Advance to hold you over until you have sufficient funds.

Related posts:

1. 7 Credit Score Pitfalls
2. Can your creditors sue you for credit card debts?
3. Banks Offer Incentives to Attract Savers
4. A Simple Plan for Paying Off Your Debts
5. Three Ways to Handle Unexpected Expenses