If you’ve got a balance on a high interest credit card or cards, it may look very attractive indeed to take advantage of one of those 0% intro APR, free balance transfer credit cards offers you see.
Balance transfer credit cards can be a great way to cut your debt load instantaneously. The new credit cards offer you the ability to consolidate your credit card debt by transferring the balances from high interest credit cards to one with a lower or even zero interest rate.
Once transferred, you pay the zero or low-interest credit card off without having to rack up further interest charges while you do so, at least for up to 15 months or when introductory rate ends. Great idea, right? Actually, yes, but there are some caveats to consider if this is something you want to do.
Are Balance Transfer Credit Cards a Good Idea?
The purpose of getting a 0% or low APR credit is credit card debt consolidation. Through lowering interest charges and other fees you can pay off credit card debt fast with lower monthly payments. To get the full benefits of a balance transfer card use the following factors to compare different credit card offers:
1. Check your creditworthiness and make sure you’re eligible. If you’ve got very good credit, you’ll be eligible for balance transfer credit cards’ amenities, but if you don’t, it may be off-limits to you anyway. Alternatively, different credit card companies may offer you a lower introductory rate than what you pay on your current credit card. This may still mean savings, of course, but it’s not going to be an interest-free proposition.
2. Make sure both balance transfers and purchases are offered at 0% interest. You’ll have to read the fine print here, because many cards will “tease” you by saying that you can have 0% interest on balance transfers, but you’ll still pay interest charges on any purchases you make on that card. Remember, when you do credit card balance transfer, the card you transfer to should have both 0% interest on balance transfers, and 0% interest on purchases for the life of the intro rate.
Another way these balance transfer cards can get you is that they’ll offer 0% balance transfer rates, but they won’t let you pay off higher interest rate charges (new purchases) until you’ve paid off the debt transfer. So be careful, make sure both new purchases and balance transfers are offered at 0% for the life of the introductory rate.
3. Make sure balance transfer credit cards are truly free. Again, read the fine print on any balance transfer credit cards you’re considering. Some credit card companies will charge you fees to transfer each balance (if you’re transferring more than one) to the card you’ve chosen. Make sure you are doing a 0% interest rate, zero transfer fee before you jump on board.
4. Remember, the intro rate expires. All good things must come to an end, and that includes that enticing 0% interest rate that got you to sign up for this card in the first place. Therefore, make sure you know when the grace period ends. Either plan to have all of your credit card balance paid off at that time, or make sure you shop around and get a new deal for another 0% interest balance transfer credit cards lined up so that you can make the switch in time.
5. Don’t rack up more credit card debt. Always remember the purpose of getting balance transfer credit cards, which is paying off debt without having to incur further interest charges on that debt. So don’t transfer all your high interest credit card debt to zero or low-interest credit cards, only to then rack up even more debt.
Be careful of hopping around too much from a credit card issuer to another credit card company, though. This will hurt your credit score in the long run. Only use this as a short-term stopgap until you get your credit card debt paid off.