Balance transfer deals
are usually around some common parameters. There are some simple questions that need to be asked. These simple questions carry a lot of wisdom and help you decide whether you should indeed go for the balance transfer or pass. However, a lot of people commonly make the mistake of choosing the wrong balance transfer deal getting the opposite of what they expect. Here are some simple questions that you need to ask when considering a balance transfer deal.
How low is the introductory rate?
All balance transfer cards
offer a low promotional interest rate. But the question to be asked is how lot is it, for your credit rating. If the introductory rate hovers over 5%, probably the balance transfer card is not worth it. There are good deals with 0% APR introductory rate that are worth considering as they are the only offers that can help you clear off your outstanding balance and effect a positive shift in your credit history.
How long is the introductory period?
The promotional period might not be what it was promoted to be. In other words, the promotional period advertised could be 21 months. But for you it might just be 6 months, if your credit rating is way below what someone would be called excellent credit rating. Therefore asking how long the introductory period is valid will help you.
What is the introductory rate applicable on?
This question always answers the tricky bit. Credit card issuers promote promotional interest rates of 0% to attract new customers. But this could be only for the balance transfers. There would always be a hefty interest rate applicable on new purchases on the credit card. Therefore you should only go for those cards which give the introductory interest rate offer on both balance transfers
and new purchases. There is a distinct disadvantage if the 0 APR is valid only on balance transfers. When you make a payment, it is adjusted towards the balance transfer. So your outstanding due from new purchases which is considered applicable for interest, would cause you to incur interest, even though that wasn't your original plan. Hence you must be aware of the exact terms.
What is the APR after the introductory period?
For a good credit
history, you must ensure that you use a card for a long enough time. In order to do so, your card interest should be manageable. If you go for a balance transfer with 0 APR introductory rate, there wouldn't be any savings if the final APR after the promotional period is as high as 30%. In fact, you are sure to run into a lot of debt, which is why you must know upfront what are the normal terms and conditions of the balance transfer card once the promotional period is over.
Is there a balance transfer fee or initial down payment?
Some credit card issuers levy a fee for transfer while other cards mandate the customer to pay off a part of the balance, both of which are options which are best avoided.