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Research: Key Points To Keep In Mind When Transferring a Balance -

The enticement of a balance transfer offer is that your outstanding balance will accrue 0% interest for a fixed period of time, allowing you to make some headway on paying down your debt. Here are some things to consider before filling out a balance transfer application:

Do You Qualify?

The first order of business when considering applying for a balance transfer credit card is to determine whether or not your credit is in good enough shape to avail you of the offer you have selected. To be eligible for the very best deals out there, you need to have very good to excellent credit, meaning a FICO score in the neighborhood of 750.

This means that you must have some sense of what your credit score is to be able to judge whether or not the possibility exists that you will be approved for the offer you have chosen. Also, another thing to keep in mind is that the new card must have a high enough limit to handle the amount of debt you wish to transfer.

Understand that there is a chance you may not be approved for the exact offer that lured you to look into transferring a balance in the first place. The zero interest promotional period offered to you may be shorter, for example, or the new card issuer may only approve a portion of the amount you have requested to transfer.

Know The Cost

There is no such thing as a free lunch and free balance transfers are similarly elusive. While certain banks from time to time do extend remarkable offers such as 0% interest on transferred balances accompanied by no balance transfer fee, typically the charge associated with transferring a balance is 2 or 3% of the entire amount. Some banks may even charge more, such as 4 or 5%.

Do The Math

The whole purpose of transferring a balance from one card to another is to save yourself money in interest charges. If the new card charges a fee for the transaction, you first and foremost want to determine whether or not the amount you can reasonably predict to save in interest charges will offset whatever the amount of money that transferring the balance will cost you.

Develop A Plan

The way to make the best use of transferring a balance from one credit card to another with a low or no interest introductory period is to pay down the balance within the promotional time period. Every dollar of each payment you make during that time will go further, as it will be put toward paying down your balance as opposed to covering interest charges. Outline a repayment plan using the length of time of the promotional APR as a guide. These time spans can range from 6 months to 2 years, depending on the offer. See if you can realistically handle making the monthly payment necessary to pay off the entire balance during that timeframe. If not, figure out roughly how much of the balance you could conceivably pay down.

Do Your Homework

Research different credit cards to find one that has an acceptable APR once the introductory low interest period expires, just in case you are unable to meet your goal of paying the transferred balance off in time. Otherwise if, after the promotional time period ends, the new card’s APR shoots up to an astronomical rate, you may find yourself in a similarly bleak debt situation as when you started.