Credit card balance transfers are financially advantageous when you can take advantage of lower interest rates provided by a new credit account. But not all balance transfers are created equal, and there are some important points you should keep in mind when considering a transfer.
Consolidation means simplification
if you can consolidate several credit accounts into one by transferring them all to the same new account, you’ll eliminate a lot of headaches with paying on multiple cards on multiple dates, and probably racking up some late fees in the process.
Watch out for hidden fees
Be wary of transfer balance fees and any other fees detailed in the fine print. Keep in mind that the biggest reason for transferring is to move to a lower interest rate, so if the amount you would pay after transferring, including fees, is more than your original balance, it’s just not worth it. Read up on the other fees creditors may try and stick you with here.
Check the transfer rate expiration
As an enticement to transfer, some companies will offer you a very low APR rate for the first six months – but then those rates balloon up to 15% or 20%. Make sure you know the expiration date of your transfer rate.
Don’t transfer a second time
You might think you can beat the ‘teaser rate’ mentioned above by transferring again after the six-month low rate expires. But when you do multiple transfers, credit agencies begin to see you as a risk, and your overall credit score may take a hit. Check out the other factors that can affect your credit score.
Watch out for new purchases
In some cases, the low interest rate boasted of on your new credit card only covers the transfer balance itself, and not to any new purchases you make. Check the fine print to make sure you don’t have an outrageous interest rate on new purchases.