Ways in which balance transfers can give you a losing deal
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 » Ways in which balance transfers can give you a losing deal

Ways in which balance transfers can give you a losing deal

By
Add to Favorites:
Case Scenario: You have good credit and are being offered a credit card for a balance transfer that offers 0% APR for 12 months. It's easy to think this is a good deal. However, you need to get your calculations right in order to avoid encountering any difficulties. Here are some ways in which a balance transfer card can give you sleepless nights. You realise your outstanding balance is way too high If you have an outstanding balance of $2000, you need to pay off at least $200 every month of that debt, aside from additional expenses charged on the card. It is vital to keep up with the minimum payments. It is so easy to lose focus, feel complacent and state at a bigger payment with time running out. The problem with balance transfer deals is that the introductory periods are teasing and you are always racing against time. Your balance transfer fee and annual fee eat into your savings If your outstanding is $2000, with 0% APR, and your older card had an interest rate of 15%, then you are looking at a saving of around $200 - $300. But if your balance transfer fee is high, such as 5 - 6%, and your annual fee is about $50, then you are not really saving much to justify a balance transfer. Unfortunately, many people do not take the time to review these calculations, and end up losing to a bad deal. Therefore it is very important to be careful, because balance transfers can hurt your credit history and even worse, place you in deeper debt. The 0% APR is only on balance transfers and not on new purchases Unless you have a huge outstanding balance and the 0% APR is offered for a long period, it is a good idea to avoid deals where the 0% APR applies only to the balance transfer, but doesn't apply to the purchases. This can create confusing credit card calculations, and allow the credit card issuer to apply tricky strategies onto the credit card customer. It is quite possible that when you pay back some of the debt, it goes towards the balance transfer amount, which does not incur any interest, rather than first paying off the expenses you charged which does incur interest. So in fact, you are never really sure how the credit card company is going to interpret your card payments, unless you completely avoid charging the credit card with any expenses, in which the 0% APR may not be available at all. Final APR is so high it eats into your savings. You might have saved a few hundred dollars through the balance transfer or even more, but that is not of value if the APR after the promotional period is high and there is still some outstanding balance left on your card. This could happen when credit card companies give you lot of rewards and tempt you to charge to your card even before you have fully paid away your debt.

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

Related Research:

Credit Card Tips For Holiday Shopping 2016

By Herbert Moore, Posted: November 23, 2016

November and December are the busiest months as gift shopping reaches its peak. People rush around looking for the best gifts and the best deals leaving a lot of money in the shops. Holiday season may force you to go over the household ... Continue reading

Credit Cards to Save More on Holiday Shopping

By Herbert Moore, Posted: November 22, 2016

Discounts and special offers are available all year round. Werther you are a bargain hunter or an impulse buyer, make sure you check online discounts and special offers. Also, if you are a cardholder, see if your credit card opens the door ... Continue reading

How to Get Free Wi-Fi in the Air

By Herbert Moore, Posted: September 28, 2016

Sometimes in-flight Wi-Fi is the bare necessity when you travel abroad or within the country. However not all airlines offer free in-flight Wi-Fi. There is only a couple of airlines that will allow you to use Wi-Fi ... Continue reading