Credit card features always seems to be very alluring but there are several things to worry about it. If you do not know about these you will inevitably end up in a deep debt hole. Credit cards are very useful tool of today wherein you do not have to carry any cash with you but can buy any item or spend it on anything you wish to.
In return, the credit card company which is not necessarily a bank will charge interest for lending you the money. Ideally, it is a debt that you carry and must start paying off as soon as you use the plastic.
Using your credit card often will therefore result in high amount of debt which if you fail to repay will add to your balance. When this balance seems to be very high and unmanageable it is a common practice to carry the outstanding debt of one credit card to another card which is usually a new one. This process is called balance transfer.
Credit card balance transfers usually are done with a new card that carries lower rate of interest than the original card. Just as it will carry fewer penalties it will also carry fewer benefits as well such as travel miles and rewards points.
However, in order to allure more people to choose their cards over their competitors there may be a few credit card companies that may offer free balance transfers. To make their offers even sweeter they will even provide a free introductory period that may range anywhere from six to twenty-one months. As per federal law requirement it must be at least for six months in which no interest is charged from the customers on the transferred sum.
Nevertheless, even with all these features and facilities, you will require proper diligence to use these cards and take advantage of the incentives offered just like any savvy consumer. Usually, balance transfer is the process to avoid paying off high-interest rates by transferring it into a lower one.
Therefore, you will need to study the offers carefully before you apply for balance transfers as there are a few credit transfers that may involve unexpected fees and charges along with a few specific terms and conditions of transfer. All these may eventually impact on your finance health.
Features to look for
When you do a balance transfer and Open a Macy’s Credit Card & Save 20 percent you must look for a few specific features, even if you are offered with a new credit card and a 0% interest balance transfer.
- Look where you stand and choose the balances that you want to transfer precisely. Make a list of all your credit cards and thebalances outstanding in each along with the rates of interests. Choose one or a couple of cards that carry the highest rates of interest to transfer and save money on interest. Remember, to qualify for balance transfer it does not have to be in your name essentially. Therefore, you can even transfer the balance of your spouse in your name if your credit is good.
- Next you should focus on the balance transfer fee and in most cases there will be one. This will give you an idea on the final amount you will have to pay for this transfer. Typically, this fee ranges from 3% to 5% even if it is a new card of lower interest. You may use an online balance transfer calculator to do the math.
- You must also check out whether or not there is any amount cap on the fee. If there is any then it will make larger balance transferring more worthwhile as such a cap will make the flat rate of interest into an effective interest rate thereby reducing it to half of the transfer fee.
- Next, it is the penalties that you should understand. If you forget about the balance transferred and let it sit for a year you will make things a bit difficult for you. This is because you will still have to continue making the minimum payment every month on the card before the specified due date just to keep that 0% rate effective. If you fail to do so, the balance will instantly start incurring interest.
- When you pay make sure you know about the rate of interest rate that you will need to pay. Find out whether the default rate is higher than the amount that you are already paying now. Also know about the cardholder agreements to know whether the penalty rate may jump as high as 29.99%, which is in most of the cases if you make a late payment, go over your limit or bounce a check.
- Know about the time when the promotion ends. Usually, 0% rate is valid for 12 or 18 months. You must make your calculations regarding the pay off during the introductory period so that you know whether or not you will be able to pay it off in full within this specific period. Know the consequences if you do not pay by this time and whether or not you can still come out ahead.
- Check the time limit within which you should complete the transfer if you are getting a new credit card. This time limit is usually one to two months. Make sure you read the fine print carefully because if you transfer after the window closes you will end up paying the regular rate of interest.
- There are a few basic requirements for balance transfer. Make sure that you meet with all these requirements. Ideally, balance transfer is not allowed within the same credit card company. You will also not be eligible for a balance transfer if there is any payment past the due date with the creditor to which you want to transfer your balance. Apart from that if you file for bankruptcy your balance transfer request will be rejected.
Remember, credit card companies do not explain everything or send a reminder. It is your responsibility to be safe.