Transferring high interest credit card balance to a low interest balance transfer card is becoming the most popular option for many cardholders. If this is the case for you, it may be wise to know what you can expect from a balance transfer card before you actually sign on for one. Before you make the switch, read these tips:
One: All good things always come to an end, more so if you signed on for a balance transfer credit card. Know that these low or even 0% interest cards have expiration dates. The fact is, low interest rate cards are offered in order to attract more customers. Once they sign on, they are only given several months, normally six months to nine months, to pay off their credit card balance otherwise they risk getting charge with even higher interest rates than their old cards. In addition to that, you may also lose the promo rate if you made the mistake of not paying your balance on time.
Two: Affordable transfer rates will not apply to everything. While it is true that you can enjoy low interest rates once you made the switch, the same thing cannot be said if you made new purchases on your balance transfer card. In fact, you are likely to pay standard interest rate on newer purchases.
Unfortunately, not many card companies are offering zero interest for balance transfer as well as for new purchases, which is why you need to check the fine print before you actually sign up for a new card.
Three: Watch out for negative payment hierarchy policy where any payments you make goes to the oldest credit card balance, not on newer purchases. In fact, if you make a purchase using a card that applies the NPH, the new balance will start incurring interest even if you make timely payments because these payments automatically goes for the older balance. It is recommended that read the terms and condition and use a different card for making purchases and another card for balance transfer. This way, you will avoid accidentally using your balance card to purchase items.
Four: Unfortunately, transferring high levels of balances again and again, will not bode well for you. Card companies tend to have negative views of cardholders who continuously carry high levels of debt and this may result in them limiting the amount of balances to carry. Worse, having too many debt will have a negative impact on your credit score.
Five: It used to be that a lot of people can qualify for balance transfer credit cards. However, due to the worldwide economic meltdown, there has been a dramatic increase in default rates. In turn, these occurrences made it hard for many people to qualify for this type of card. These days, you need to have excellent credit history in order to be eligible for this card.