Credit card companies often try to lure new customers with the promise of zero or low interest rates on balance transfers. These offers can be helpful and may reduce your minimum payments as well lessening the total amount of interest you will pay over the lifetime of the balance. Despite the benefits, balance transfers may get you into trouble if you do not know the terms of the transfer.
Time Limit
Zero percent interest rates are typically only offered for a limited period of time such as one year. In addition, the interest rate may not apply to the entire balance. Credit card companies may stipulate that rate only applies to balance transfers or to new purchases.
Other Interest Rates
While credit cards may offer low rates on balance transfers and new purchases, they may increase interest rates on your current balance. Also find out what the interest rate is when the low interest rate expires because this is the interest rate you will be paying if you do not pay off the balance within the time limit. If the interest rate is variable, rather than fixed, the credit card company has the right to raise your interest rate.
Fees and Late Payments
Credit cards may offer low interest rates to draw your attention away from high annual fees. In addition, companies often charge a balance transfer fee. Make sure that the money you will save in interest payments is more than the annual and balance transfer fees. Also check the fees for late payments and compare them with your current credit card. Late payments may also cause you to lose the low or zero interest rate.
Other Considerations
Prior to transferring a balance, know what you will do with the old credit card. If you are not able to transfer the entire balance, you will need to make payments on both credit cards. In addition, it is important not to make new charges on your old card as this will drive you deeper into debt.
0 comments:
Post a Comment