A few things to know about balance transfers

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Credit Card Applications » Research » Guides » Balance Transfer Cards » A few things to know about balance transfers

A few things to know about balance transfers

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Balance transfers come really handy when one has a lot of outstanding debts and would want to avail the benefits or offers on another credit card which are not available on their current credit card. However, credit card holders must know a thing or two about the balance transfers before choosing to shift from one credit card another. Lack of proper consideration could not only cause further financial trouble but also lead to reduction in the credit rating which isn't very good news, given the importance of credit scores.

The introductory and eventual APR of the new credit card

Before going for balance transfers it is extremely important to find out what the immediate benefits of the new card are going to be and what the eventual tradeoffs are. There are many credit cards which offer 0% interest in the introductory period for 6 - 12 months. This would certainly help in getting rid of 6 - 12 months of interest which would otherwise accumulate on massive outstanding credit card balances. It would be a good move to go for that balance transfer in that scenario. But two other things along with the introductory rate should certainly be considered. The first is the introductory term period for you in terms of the credit rating as it is common to have variable introductory periods depending on the credit history. The second is the eventual APR which shouldn't be way too high otherwise it will undo the benefit yielded from the zero interest rate in the beginning.

Extra Charges like balance transfer fee

If you have an outstanding balance which you will take some time to pay off going for a card with introductory low rates for balance transfer is not a bad idea. But if the new credit card levies a balance transfer fee, annual fee or any other charges not present in your current card, you might end up on the same line.

Effect on Credit rating

Balance transfers usually tend to reduce the credit rating. This is why you must consider only those credit cards where the credit limit extends the older credit limit. This is because credit score depends on how close your outstanding balance gets to your credit limit. It is also a good idea to keep the old accounts open for the sake of credit history. Shortening the credit history will further lower your credit rating which will not work in your favor.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products’ Terms & Conditions on the issuing banks' websites.
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