The content is accurate at the time of publication and is subject to change.
Balance Transfers are offered to consumers with a good credit background and a serious credit reputation. So for shopaholics, this is not good for you. You`ll know why.
Balance transfers in the United States seem to have grown quite a while. With the flocking 0%, offered by banks and credit card companies, who wouldn`t be tempted to get t free money? Imagine that. No interest for twelve months? You can shop all you want! That`s just a very catchy part. Later on, after twelve months, you would be seeing a bloated interest charge on your bill. That`s why taking on balance transfers needs a double thought.
Balance transfer is like a gamble. Banks and credit card companies give you a temporary offer that can give you the pleasure of doing anything, such as buying thousand dollars worth of merchandise. Then they will charge you with a big interest later on. This is certainly a pitfall that you should be careful of. Balance transfer is a good tool to get lower interest charges, no doubt about that. But it is a financial game, too. That is why you have to be smart to win the gamble.
You have to know how long the zero or low interest rate is going to last. Determine the real interest behind it. At what rate are you going to be charged after that time? If you foresee that you`ll be paying quite high, try settling a major part of your debt now. Of course, this has to be done within the low-interest period. If you let the debt hanging after the period ends, prepare to be charged with extravagant finance costs.
Balance transfer fees are also financial headaches if you transfer multiple times. They typically account up to 5% but they have a minimum limit up to $50 or slightly higher. So try to make a transfer just once.
Sometimes the low interest is applied only to the amount transferred and not on the new charged amount. So it pays to read the fine print. Know all the terms and conditions that apply. Remember that it`s your money, future and current, we are talking about here.
Those are the basics. If you don`t want to get into this kind of trouble, try staying away from balance transfer products that say they offer zero interest and no balance fee transfer. These usually have hidden terms behind them.