Credit card debts can create havoc in our lives and may ultimately lead to bankruptcy filing. In order to avoid such a situation, balance transfer method can be very effective. In this process, the balance amount in all the credit cards are transferred to a card which has a low interest rate. However, there are certain things that you should remember about balance transfers. Let's take a look at them:
1. Good credit is a must to qualify: In order to qualify for a zero interest balance transfer cards you should have good or excellent credit. Unless you have excellent credit scores, none of the creditors will be ready to give you such a card. If they do so, it will become riskier for them.
2. Fees are unavoidable: In order to transfer a balance from a high interest credit card to a low interest one, you'll always be charged a balance transfer fee. This balance transfer fee is determined as a percentage of the total amount that you're transferring. These days, there are no caps on the fees charged for balance transfers. For example, on a transfer of $10,000 debt to a balance transfer card, you might have to pay a fee of around $300.
3. Introductory rates will expire: Normally, a balance transfer card will offer you an extra-low APR between 0-5%. However, this rate won't last forever. After around 9 months – 1 year, the interest rates may change between 8-18%. If you make late payments, then your great rate will disappear even sooner.
4. Low transfer rates won't apply to everything: Low or zero interest rate balance transfer cards won't offer interest free rates on new purchases. Such rules will be mentioned in fine print. So make sure that you read them and know how much you'll be charged for new purchases. However, there might be some cards which might offer introductory rates on new purchases for the first 6 months.
5. Other debts can also be transferred: Most of us don't know the fact that apart from credit card balances, we can even transfer other debts into a balance transfer card. Such debts include – auto loans, loans for purchasing appliances and furniture as well as other monthly instalment payments with the help of checks from the bank that issues the credit card.