Transferring your balance to a better credit card can save you money. But if you don't choose your new card wisely, you could end up paying more.
The following post comes from partner site LowCards.com.
Many credit card consumers are once again being flooded with attractive offers to transfer their existing balance to another issuer. Several issuers are now offering 0-percent interest rates for more than a year on balance transfers and purchases. Most of these offers are going to cardholders with good or excellent credit scores, since they represent less risk of defaulting.
If you have good credit and your credit card APR is currently above 15 percent, this may be a good time to consider transferring your balance to a card with a lower rate. Transferring your balance to a card with a 0-percent introductory rate can save a significant amount of money. If you currently have a balance of $5,000 and an APR of 15 percent, a 0-percent rate for a year will save $750 in interest payments.
But there are several tips for consumers when considering a balance transfer…
1. Remember that transfers aren’t free. They come with a balance transfer fee, usually 3 or 4 percent of the total amount you transfer. Before you apply for a balance transfer card, do the math to see if the amount of interest payments you save with the introductory offer is more than the balance transfer fee that has to be paid immediately.
2. Think long-term. If you feel you’ll be unable to pay off the entire balance during the introductory period, pay attention to the interest rate that you’ll pay after the introductory rate expires. In this case, a low APR for the long-term could be more important than the length of the introductory period.
3. Low scores can mean high rates. If you currently have a low credit score, you might not receive the introductory offer that’s advertised. The ongoing APR you receive may be higher, or your introductory period may be shorter. Or you may not be able to transfer your total balance.
4. Timeliness matters. If you do transfer your balance, you must pay your credit card bill on time every month. If you have a late payment, your introductory period will likely end – and you will be assessed the ongoing APR on the transferred balance.
5. Everything included? The introductory rate might only be applicable for the amount you transferred. Unless the introductory offer specifically includes new purchases, any purchase made with the new card will be at the ongoing interest rate.
6. Just say no. If the offer you receive doesn’t meet your needs, decline the card. Limit the number of applications, because multiple credit applications are a red flag on your credit report and can lower your credit score.
7. No grace. There’s no grace period with balance transfers. Interest charges begin at the time the check is issued to your new credit card issuer.
8. Held in the balance. The new issuer pays the amount of the balance directly to the old issuer, and the amount you owe them will be reduced by the amount you transferred. The available credit on your new account will be reduced, as if you had made a purchase.
9. It takes time. It takes about four weeks for the balance to be transferred. Continue to make all required payments until you confirm that the balance transfers were made. Transferring a balance does not automatically close your old account. If you want to close that old account, contact the issuer in writing and close the account.
Here are some of the more attractive balance transfer offers on the market…
1. Citi Platinum Select or Citi Diamond Preferred – Both of these cards come with a 0-percent interest rate for 21 months on both the balance transfer and new purchases. The balance transfer fee is 3 percent. The ongoing APR is 11.99 to 20.99 percent.
2. Discover More – This special Discover More offer is for 0-percent interest on balance transfers for 18 months. Consumers also receive 0 percent on purchases for six months. The balance transfer fee is 3 percent and the ongoing APR is 11.99 to 20.99 percent.
3. Capital One Platinum Prestige – Consumers receive 0-percent interest until December 2012 on both purchases and balance transfers. The balance transfer fee is 3 percent. The APR is 10.90 to 18.90 percent.