Credit Card Balance Transfer

 

Balance transfers on credit cards can be an attractive proposition for both consumers and credit card companies. For consumers that are carrying a considerable balance and no immediate path to paying it off, it can allow a period of time where they can pay down the debt, while temporarily lowering, or even eliminating, interest payments. For credit card companies, they use this hook to acquire new customers from competitors. There are definitely things to keep in mind when considering a credit card balance transfer.

Things to keep in mind:

Transaction fees – Many balance transfers include an incentive period with a lower interest rate, sometimes zero percent, but many include a fee of 1-5% of the transferred debt.

Incentive periods – the length of the incentive period can vary, but is usually 12-18 months. After this period of time, the standard interest rate of the card usually kicks in and you will have to start paying finance charges on whatever balance remains.

Interest rates – Be sure you are considering the APR of the new credit card you are transferring your balance to, because many times new purchases will incur finance charges at the regular rate of the card and not be included in the incentive period.