Is a Credit Card Balance Transfer a Good Idea?
Many people today are looking for a way to lower their credit card payments. With 55% of Americans currently maintaining a balance on their credit cards, the idea of being able to transfer that debt at 0% interest and delay monthly payments, sounds like a dream. So to help you determine the pros and cons of credit card balance transfers, let’s take a closer look:
Low or No Interest Rate on Transfers
Low or no interest on outstanding debt is the first thing that draws in many potential customers. The idea of being able to pay no interest on your current debts is enticing however read the fine print. What happens when the introductory period runs out and you haven’t finished paying off your debt? What are the terms of any new purchases made using that credit card? Be an informed consumer.
Balance Transfer Effects On Your Credit Score
Whenever you open a new line of credit, the act of checking your credit and receiving that new line of credit indicates that you have the ability to take on new debt. If you are already in credit trouble, this could negatively impact your credit score. However, if you immediately close the credit card from which you are transferring the balance and begin to pay off your new credit card, this could have a positive impact on your credit longer term.
Beware of Hidden Fees
Some credit cards offer a no balance transfer provided that the transfers are made within a specified period while others may charge a percentage of the total amount of money transferred. This amount is usually between 3-5%. However, if you do your math, you may still come out ahead. If a bank charges you a 3% transfer fee on $1,000, this means that you are paying your new credit card company $30. Take a look at the interest rate your first company is charging, possibly as high as an 18% interest rate, well, you can see how you will save more money transferring your debt.
For more information on credit card balance transfers, contact us.