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Most individuals who own credit cards would have, at some point in time received balance transfer offers from other card companies, irrespective of their credit rating.
While most people tend to think that the most sensible thing to do would be to transfer balances from a high-interest credit card to a low-interest credit card. Well, that is not exactly the case as there are many other details that one has to look into before moving from one card to another.
Firstly, get to the bottom of the low interest rates. Find out for how long these low interest rates would last and what would be the interest rates after that period is over. Generally, the introductory period or the grace period on most balance transfer offers are up to a year. After that period the balance transfer reverts to the original interest rates, which is usually at 16%. Rarely one may come across balance transfer offers where the interest would continue to remain low until the entire balance is paid off. The reason one should pay attention to the time frame is so that one can evaluate the pros and cons of not being able to pay off the entire balance. Usually the interest rates are much higher after the grace period is over; it might actually get higher than the normal interest rates. In such cases, the savings that one would earn could easily get wiped out as the higher rates take over.
It is important to watch out for the balance transfer fees as well. The interest could easily be offset depending on the fees one is expected to pay. Balance transfers generally charge a percentage of the balance as the fee, where there is a minimum as well as a maximum amount that is set.
One has to read the fine print in order to get to the bottom of the balance transfer fee that is charged before making the transfer. There should be no hidden charges and if there are no balance transfer fees it would be clearly stated that there would be no fees associated with the offer.
It is important to check where exactly the rates are low on particular transactions. Generally, in credit card transactions there are 3 categories such as purchases, cash advance as well as balance transfers. Each of these categories has different rates that are levied and cash advance usually has the highest rates charged. For instance, if a card offers low rates on the purchases that are made, and then if the balance transfer is done, one may not actually save any money. One has to check thoroughly as there are cards that offer low rates for both balance transfers as well as purchases. That would be the best bargain. If the rates are applicable only to balance transfers but not to purchases, then refrain from making any purchase on that card.
Card companies generally apply the payments made to the lowest rate transaction. This would mean that when a person makes a fresh purchase, it will remain there and would be charged a higher rate until and unless the other balances are cleared off. Hence ensure making payments on time.
