Important Considerations for Balance Transfer Cards
A balance transfer credit card can be incredibly beneficial when you are overwhelmed by credit card debt. These offers have the potential to save you money in interest penalties and allow you to consolidate your debt onto one card.
Before you get wrapped up in a balance transfer deal, you need to realize there are some drawbacks to these cards. They may work wonderfully for some people, but they are certainly not ideal for everyone.
Here are some quick factors to keep in mind:
- You may be assessed a balance transfer fee. This is different from the credit card’s APR. Most balance transfer fees are 3%, which could quickly increase the debt you have. It can also be a significant fee depending on the amount of money you transfer from one card to another. There are some cards, like Chase Slate, which do not have a balance transfer fee.
- Your credit score may drop. Any new credit account that you open could lower your score a bit, but that shouldn’t last long if you make consistent and timely payments.
- You may be tempted to use your old cards once the balances are gone. If you cannot control this, don’t allow yourself the opportunity to rack up any more debt.
- Your introductory rate will not last forever. In most cases, your APR will increase after a certain period of time. Be prepared to pay off your full balance during that introductory period.
- Your new card’s credit limit may not cover all of your existing debt. In that case, you have to decide whether it is worth the potential fees to transfer just a portion of the debt to the new card.
Consider this information before transferring a balance to a new card, and you will be less likely to accrue more debt along the way.