Tips for Credit Card Balance Transfers
Consider the pros and cons before you transfer credit card balances to a new card.
If you're looking to pay off debt, you may have considered consolidating via a credit card balance transfer, paying off old cards by transferring their balances to another card with a better interest rate (or even zero interest). This can be an effective strategy, but it’s best to weigh all the pros and cons before making a final decision. Here are some things to consider:
Do the math
Before you transfer any balance to a new card, estimate the amount you’ll save in interest and compare it to the transfer fee, so you can figure out if you'll actually save money. Online calculators can help you with this task.
Always factor in the fees
Most credit cards come with fees for balance transfers, so you'll need to be familiar with these before you move forward with any transfer. The last thing you want to do is end up paying more than it's worth. If you are unsure what the fee is, look it up through the issuing bank's website or get on the phone and ask. Don’t be afraid to ask for clarification if you don’t understand the terms. It will be worth it to spend a few extra minutes making sure you know exactly what the cost will be.
Find a card with an extended promo period
When seeking out a new card to transfer balances to, try to find one that has an extended promotional period. Many new cards offer an introductory APR (annual percentage rate) for 12 months or more from the date the card is opened, and in some cases the introductory APR exists for purchases as well. Simply put, the longer you can put off paying interest, the more time you have to chip away at your balance before regular interest rates resume.
Pay attention to interest rates
Pay close attention to the interest rate of the card you plan to transfer to, as well as rates of the cards you already have. If the new card has a high interest rate and you’re unable to pay off the entire card balance before the promotional period is over, it may actually end up costing you more in the long run.
Don't add to your debt
If you're going to transfer your balance, it's best not to add to it beforehand. Don't continue to add to your debt by making new purchases and/or falling behind on payments before you even transfer your balance. The whole point is to get it paid down, and you're not setting yourself up for success if you run the balance up before you transfer it.
Keep your credit score in good shape
Keep all your payments on time and pay down debt rather than adding to it. If your credit score isn't in good shape, it's going to be more difficult for you to get a new credit card account, let alone one that will be worth transferring old balances to. If a less-than-desirable credit score is keeping you for getting credit, consider getting a card that is secured by a savings account. Making regular payments on a secured card can help you improve your credit score.
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The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.