Balance Transfer Credit Cards: Five Things to Know before you Apply
Posted on 5/7/2009 - Filed under Balance Transfer Cards
You may have seen advertisements for balance transfer credit cards. These cards let you bring over a balance from one of your current credit cards. You can then pay off the amount on the new card, usually at a lower interest rate.
This can work out really well if you have some debt you’d like to get rid of. In order to make the most of a balance transfer credit card, however, you’ll want to know some things before you apply. The following information will help you find the right balance transfer credit card.
There may be other benefits. Using a balance transfer credit card to pay off an existing balance is a good perk. Before you apply for one, check for other benefits. You may be able to get some cash back or enroll in a rewards program.
There are fees involved. You can expect to be charged when you make the balance transfer. This is usually a certain percentage of the amount transferred, such as 3 percent. Some cards include a cap, like $75, for the fee. Others do not have a cap, so check to see what’s involved before you apply.
The intro APR will expire. Most balance transfer credit cards come with an initial 0% APR. This may apply to new purchases, or the transferred balance, or both. After awhile, a regular interest rate will kick in. You’ll want to make sure this APR is less than what you are currently paying on your existing balance.
You may be charged a higher APR for purchases. Balance transfer credit cards are usually set up so that if you make a new purchase, your monthly payment will first be applied to the purchase, and then to the transferred balance. If you start shopping right away with the card, you’ll have to first pay off the new balance. After that, you’ll pay off the old one. This can take awhile to do, so you may want to cut back on your shopping and pay that balance off first.
It’s still a credit card. After you pay off the balance, you can keep using the card just like you would any other credit card. Add it to your wallet, and use it in a way that works best for you and your financial situation.
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