Things that can go wrong with balance transfers

Advertising Disclosure

Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from many credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. Credit-Land.com has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Balance Transfer Cards » Things that can go wrong with balance transfers

Things that can go wrong with balance transfers

By
Add to Favorites:
Before we go into what can go wrong with balance transfers, we need to first understand what balance transfers are all about. Balance transfers work on the principle of transferring all the outstanding balance on a current credit card onto a new credit card. This is done in order to avoid the high prevailing interest rates of your current credit card, by taking advantage of the zero percent interest rates offered by the new credit card as an introductory offer. There are a number of things that can go wrong with balance transfers. With the advent of the global economic crisis, a lot of people are finding that balance transfers are their only way out of the vicious cycle of debt. But if you start taking out balance transfer cards without thinking about the consequences, you might be in for a big surprise. Before you open a new credit account, you need to first calculate how much you are spending on your current credit card. Let`s take an example as a case study. If you had $10000 outstanding in a credit account and it is charging you 20% as interest rate, you will have to pay $2000 every year as interest. Now, you need to find an option that will let you pay less than $2000 every year. If you go for a balance transfer, you will have six months to two years to pay back the outstanding debt. During this period, you will not pay any sort of interest on the amount that you have borrowed. However, you will have to pay a certain fee to make the initial transfer. This fee can range between 5 to 10 percent of the outstanding amount. Sometimes you will have to pay a flat rate of $50 to $100, this is much better if you are transferring a larger amount. You will also have to pay an annual fee since it is a zero percent credit card. You need to calculate to see if these charges taken in total, will amount to much more than what you are already paying. You also need to realize that whatever outstanding balance remains after the introductory period, you will be charged interest. Before you open the account, you need to find out what this interest rate is going to be. If you fail to take these precautions, you can be in for a surprise when you open the account. Apart from all this, the fact that your credit score will improve when you start making regular payments towards the clearance of your debt, has to be taken into account. Savings are just one aspect, apart from this it is very true that you get more time to repay your debt. You can consolidate your finances, and if necessary sell some assets to be able to pay off your debts. It is important to be aware that you will have to pay some sort of minimum amount at the beginning, to clear a portion of the outstanding debt before you can get the balance transferred.

Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

How the Fed Rate Rise Impacts Credit Cards

How the Fed Rate Rise Impacts Credit Cards

By Credit-Land, Posted: May 25, 2017

Recently, the Federal Reserve hiked its benchmark rate by a quarter percentage point, as a result, you could see a rise of the interest rates on your credit cards by 0.25%. That was the first hike of the key rate in 2017 and the Fed ... Continue reading
Top 5 Credit Card Offers For Those With Excellent Credit

Top 5 Credit Card Offers For Those With Excellent Credit

By Credit-Land, Posted: May 25, 2017

Do you have excellent credit? If so, banks are actively looking to win you as a new credit card customer by offering some unprecedented deals. Although banks have been more careful about acquiring customers with questionable credit ... Continue reading
Interest Free Credit Cards: Pay No Interest Until 2019

Interest Free Credit Cards: Pay No Interest Until 2019

By Credit-Land, Posted: May 23, 2017

Carrying a balance on a credit card is wasting your money on interest fees. It is easy to avoid interest payments on purchase transactions by paying off the entire card balance by the due date each month. But what to do if you are already ... Continue reading