If you’ve got a lot of debt on
a few high interest credit cards, then chances are that
those offers you’re likely receiving in the mail
for lower rate cards are looking pretty good. After
all, we all know that there is a direct correlation
between the amount of interest you pay, and the total
you will pay over the long haul if you make monthly
payments. In addition, those interest rates affect your
monthly payments—the higher the rate, the more
you’ll have to dish out every month.
But before you leap at the first low interest card
you see, it would be wise to ask some questions to
make sure that you’re truly getting what you
think you are. Here are some things you should always
find out before you transfer any balance.
How long will the interest rate last?
Many times an offer for a low interest rate card is
for a short time period only, and then the rate increases
drastically. So, if you’re looking to transfer
a balance that currently has a 12% rate to a 9% rate,
it would only be beneficial if the rate doesn’t
skyrocket past 12% after the first 3 months.
Will my rate differ for new purchases?
Sometimes a credit card will issue a low rate for
balance transfers, but any new purchases on the card
will be calculated at a higher rate. Be sure to look
for a card where both the balance transfer and new
purchases are calculated at the same low rate.
What will I pay for the balance?
You’ll generally be charged a fee to transfer
a credit card balance, which is normally about 3%
of the balance. (It tends to top out at about $75).
Be sure to total in the fee to determine if you will
be still be saving money.
What’s the fine print? You
have to keep your eyes open when transferring a balance
for anything that will trigger an automatic rate increase.
For example, how you transfer the balance may affect
what interest rate you pay, and for how long the introductory
rate will be good for. Be sure to ask how you can
achieve the lowest rate and for the longest amount
of time—by transferring the balance by phone,
convenience check or cash advance.
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