Balance transfer credit cards seem to be tempting propositions from the outside, especially to those who are paying hundreds of dollars in credit card debt interest every year. However, not everything is as rosy as it seems and not all balance transfer credit cards would really help you lower your debt. This is where you need to be diligent, do your home work and ensure that you only accept the right card. There are some signs that can help you avoid the wrong balance transfer credit cards, which drain your finances further, with a false promise of helping you out of trouble. Here are some things that you should mind when dealing with balance transfer credit card offers.
Do they give you an introductory offer for long enough?
A balance transfer credit card is worth considering if it at least comes with an introductory offer that is very attractive. The most popular incentive currently is the 0% APR during the promotional period. The idea is to find out if you will really benefit from the 0% cards in any way. For this the duration of the promotional period is extremely important. If it is longer than 12 months, then you might save substantial amount of money in unpaid interest. But this time frame could be as low as 6 or even 3 months, depending on your credit history. In such cases, you can hardly save any money that justifies taking up the new balance transfer offer.
0% vs. fixed APR cards
An important thing to consider with balance transfer credit cards is their value with respect to your financial condition. If you have a big enough debt, $2000 for example, you need to pick the card that helps you repay the debt faster. Take 2 situations to compare now. A card could offer you a 0% APR for 12 months after which there will be a steep hike to 20%. Another card offers you a fixed APR of 10% which wouldn’t alter at all. You need to be able to think for the longer term before taking the decision. If you cannot put a tab on your spending, it is better to go for 10% fixed APR balance transfer card, as you will be assured that you have to pay less interest over an extended period of time.
APR is not everything when it comes to a balance transfer card. There are other costs that could eat into your savings without your realizing it. Two important costs associated with balance transfer credit cards are the annual fee and the balance transfer fee
. While the annual fee of $50 - $100 is waived off in some cases, it is common to find a balance transfer fee of around 3 - 5% of the transferred balance being levied. If this exceeds your savings, then the balance transfer credit card is really not worth it. Other additional costs compared to your original card should also be considered before you consider moving your balance to the new card.