Ways in which balance transfers can give you a losing deal

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 » Ways in which balance transfers can give you a losing deal

Ways in which balance transfers can give you a losing deal

The content is accurate at the time of publication and is subject to change.
Case Scenario: You have good credit and are being offered a credit card for a balance transfer that offers 0% APR for 12 months. It's easy to think this is a good deal. However, you need to get your calculations right in order to avoid encountering any difficulties. Here are some ways in which a balance transfer card can give you sleepless nights. You realise your outstanding balance is way too high If you have an outstanding balance of $2000, you need to pay off at least $200 every month of that debt, aside from additional expenses charged on the card. It is vital to keep up with the minimum payments. It is so easy to lose focus, feel complacent and state at a bigger payment with time running out. The problem with balance transfer deals is that the introductory periods are teasing and you are always racing against time. Your balance transfer fee and annual fee eat into your savings If your outstanding is $2000, with 0% APR, and your older card had an interest rate of 15%, then you are looking at a saving of around $200 - $300. But if your balance transfer fee is high, such as 5 - 6%, and your annual fee is about $50, then you are not really saving much to justify a balance transfer. Unfortunately, many people do not take the time to review these calculations, and end up losing to a bad deal. Therefore it is very important to be careful, because balance transfers can hurt your credit history and even worse, place you in deeper debt. The 0% APR is only on balance transfers and not on new purchases Unless you have a huge outstanding balance and the 0% APR is offered for a long period, it is a good idea to avoid deals where the 0% APR applies only to the balance transfer, but doesn't apply to the purchases. This can create confusing credit card calculations, and allow the credit card issuer to apply tricky strategies onto the credit card customer. It is quite possible that when you pay back some of the debt, it goes towards the balance transfer amount, which does not incur any interest, rather than first paying off the expenses you charged which does incur interest. So in fact, you are never really sure how the credit card company is going to interpret your card payments, unless you completely avoid charging the credit card with any expenses, in which the 0% APR may not be available at all. Final APR is so high it eats into your savings. You might have saved a few hundred dollars through the balance transfer or even more, but that is not of value if the APR after the promotional period is high and there is still some outstanding balance left on your card. This could happen when credit card companies give you lot of rewards and tempt you to charge to your card even before you have fully paid away your debt.

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!