Negatives associated with balance transfer cards

ADVERTISING DISCLOSURE

ADVERTISING DISCLOSURE:
Credit-Land.com is an independent, advertising-supported web site. Credit-Land.com receives compensation from most 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 » Negatives associated with balance transfer cards

Negatives associated with balance transfer cards


Updated: September 28, 2018

The content is accurate at the time of publication and is subject to change.
Balance transfer credit cards are useful for those who are looking to get some relief from excessive interest rates charged by credit card companies on customer debts. Balance transfers are usually accompanied with promotional options like 0% introductory interest rate and various other incentives. However, one must be careful with balance transfer credit cards particularly because they are also associated with several costs that may come as a surprise to the credit card customers. Balance transfer fee Normally customers have to pay a balance transfer fee that varies between 3 – 5 % of the credit card balance that customer has. This transfer fee could eat into the savings which the customer hopes to make in the form of interests avoided through 0% introductory rate offer. If one has a high credit card balance then the balance transfer fee could also be very high and would add to the existing card debt. The customer has to be careful in his calculations and estimations to ensure that the balance transfer is worth it. Annual fee The annual fee on credit cards is another way in which credit card companies try to charge the customers even as they try to profit from the 0% introductory rate offer. Although many card issuers waive off the annual fee on the credit cards in the first year, it isn’t really a compulsion. An annual fee in excess of $75 could be substantial and would be an added cost that comes along with the credit card. Initial percentage payoff Customers who are planning to go for a balance transfer might find their calculations upset by the fact that some credit cards expect an initial payment before the balance transfer. This payment would be a percentage of the total balance. Although this helps the customer to reduce the debt initially, the interest saving they were hoping to make isn’t really achieved. Higher interest rates after introductory period One of the things that customers fail to realize is that in most balance transfer credit cards, the interest rate is hiked rather steeply at the end of the introductory period. Card customers have to be careful about this because if they don’t clear their debt before the end of the introductory period they might find themselves paying excessive interest once again. This will, in a way defeat the purpose of the balance transfer credit card. Therefore one of the tricks is to make sure that the balance transfer credit card is a usable one. In other words, one should be able to stick to the card even after the introductory period. This is possible only if it offers reasonable card terms even after the introductory period is over. Lowering of credit limit This could be one of the facets that card customers might ignore. If you are closing account with one credit card to transfer balance to another, you must ensure that the new credit limit is higher than the older one. Otherwise, your credit utilization ratio will increase thereby adversely affecting your credit rating.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:
Get the latest news, articles and expert advice delivered to your inbox. It's FREE.

Related Research:

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Autumn 2018: Best Rewards Credit Cards for Thanksgiving Shopping

Posted: November 8, 2018

Thanksgiving is coming, and whether you are hosting a meal or coming as a guest, your spendings are going to accumulate faster than you can notice. A holiday feast is a costly matter – each year Americans spend around $50 on a Thanksgiving ... Continue reading
The Best Credit Card for Earning Cash: Discover it® Cash Back

The Best Credit Card for Earning Cash: Discover it® Cash Back

Posted: November 2, 2018

You’ll have hundreds of dollars in your pocket in no time because you’ll earn money back on every purchase you make with this card. There are no restrictions on the amount of cash back you can get, and Discover even matches every penny you ... Continue reading
Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Top 5 Cards for Travel from Our Partners: Autumn 2018 – Expert’s Choice

Posted: October 10, 2018

Nights are drawing out, the wind is colder every day and you already feel the lightest breath of winter on your face - autumn is here. Holidays are over, kids are back to school and all you are left with are hefty holiday bills that you ... Continue reading
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!