What are Balance Transfer Credit Cards?
Balance transfer credit cards are usually cards with a low interest rate. Consumers can save money on repayments by transferring their total outstanding debts from cards with higher annual percentage (APR) rates to a card with a low APR. Usually these cards offer special introductory rates for a limited period.
But is it a good idea to make use of balance transfer credit cards
? It can be as long as you use this management tool wisely. The most important thing to remember is to pay the balance before the limited time period expires and to make sure to read the fine print on the credit card offer. Failure to do this will only compound your debt problems.
So what do consumers need to know about balance transfer credit cards
? First and foremost is finding out how long the special introductory rate lasts. Make a special note of the expiry date and work out a budget that will enable you to pay the balance within that period. Then stick to it!
Consumers also need to know what the card's annual percentage rate will be once the special, limited period has expired. This will help you choose the card that best suits your financial needs. Balance transfer credit cards can increase to more than your current highest credit card APR after the teaser rate expires. Be careful!
Find out whether the special low rate actually applies to transferred balances! Some issuers of balance transfer credit cards offer the special rate on new purchases only. If you only need the card to help you save money on paying your debt down you might be very disappointed to find that your plan thwarted and all you have is a credit card you can't use! Make sure your card is going to work for you before you accept the offer.
What about annual fees? Fins out if your balance transfer credit cards have a yearly fee attached to the contract. What is that fee? Calculate the actual money you will save based on the annual percentage rate on the new and old card plus the annual fee. Is it worth it?
Ask your credit card issuer about any fees related to transferring balances. Some credit card companies charge fees as high as four percent. This means that the more you owe the higher your fees are going to be on balance transfer credit cards.
Then there are late and over-the-limit fees to contend with. Find out how much you will be charged for late payments. One or two late payments on balance transfer credit cards could see your savings rendered useless.
Balance transfer credit cards can be a helpful tool to help pay down your debt but consumers should ensure that they read the fine print. If you don't understand the terms of the offer contact the issuer and ask the right questions. Remember paying down your debt is your responsibility. Don't let the pressure of mounting debt cause you to make another financial mistake!
