Are Credit Card Transfers a Good Idea? |
By Laura Gutmann on February 24, 2010
.jpg.aspx?width=75&height=75) As you look to manage your debt, you may encounter offers from credit card companies to transfer your balance to a card with a lower interest rate.
Commonly, companies will provide 0% interest for the first six months as a new customer. If you owe a large amount of money, transferring your balance could help you buy time to make payments towards what you owe. You can work towards paying off your bill without incurring massive interest charges.
However, you need to make sure that after the introductory period is over, your interest rates don’t skyrocket. A typical interest rate is around 15% - and you can probably do better than that by shopping around.
One recommended resource is www.mint.com. This online money management tool will analyze your current financial picture and consolidate all of your account information into one spot. There’s a handy section steering you towards ways to save, which often recommends credit cards that provide a better offer than the one you’re receiving now.
According to www.bankrate.com, there are a few other things you should consider before making a switch. It’s possible that the 0% interest rate won’t apply to new purchases. In addition, some companies charge a transfer fee when you switch your balance from one card to the next. You may not even qualify for their lowest rate offers if the company sees you as a risky customer.
If you have decided that a transfer is the way to go, it’s best to reduce or stop further spending on your new card. You’re already in enough debt – you don’t want to make your problems worse by adding to your bill and increasing the possibility of greater interest charges down the road.
You should also make sure that your information is going to be transferred securely – you don’t want to end up the victim of a scam, or getting your identity stolen.
Finally, double-check to see if your old credit card company properly closed your account. You don’t want to continue to collect charges like annual fees, which can still be applied if the account is left open.
Note: Frequent balance transfers have a negative impact on your credit scores. This effect is magnified if a balance transfer results in utilizing a high percentage of your available credit. |
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