Balance transfers can be handy for paying off debt
If you're saddled with credit card debt - which can be particularly pernicious due to hight interest rates - paying it off should be a priority. Balance-transfer credit cards can be a handy tool for that, but proceed with caution.
First off, know that you may need a good credit score to qualify for a good balance-transfer card. (You might get a significantly lower interest rate on your current card, though, just for asking for one.)
Next, read the details. Once card might offer a 0% rate for 15 months, while another extends it for 21 months. Once the rate expires, you'll be paying the card's regular rate, so check the interest-rate range you might expect later. Some card's recent rates were in the 12% to 18% range, while others were more like 17% to 26%. (Ideally, aim to pay off your debt in full before the 0% rate expires.)
Find out whether a fee will be charged on the amount you transfer, too. Fees of 3% to 5% are not uncommon, and with a large enough balance, that might not be worth it.
Reading a card's fine print can alert you to possible future headaches. Will a single late payment trigger a steep rate hike (a "penalty APR")? Will new purchases face steep interest charges? (Typically, only the transferred balance enjoys the 0% rate, and new purchases generate interest as usual.)
Remember to crunch some numbers to find out just how good a balance-transfer card's proposition is. If the card charges 0% interest for the first 18 months, that's great. But if it also charges a balance transfer fee of 4% on the $20,000 you're transferring, that an $800 charge. Make sure your savings on interest will make the cost worthwhile.
Balance-transfer cards can help you simplify your financial life, too, if you consolidate debt from several cards onto one low-rate card. Learn more about credit cards and check out some recommended ones at TheAssent.com and IndexCreditCards.com.
First off, know that you may need a good credit score to qualify for a good balance-transfer card. (You might get a significantly lower interest rate on your current card, though, just for asking for one.)
Next, read the details. Once card might offer a 0% rate for 15 months, while another extends it for 21 months. Once the rate expires, you'll be paying the card's regular rate, so check the interest-rate range you might expect later. Some card's recent rates were in the 12% to 18% range, while others were more like 17% to 26%. (Ideally, aim to pay off your debt in full before the 0% rate expires.)
Find out whether a fee will be charged on the amount you transfer, too. Fees of 3% to 5% are not uncommon, and with a large enough balance, that might not be worth it.
Reading a card's fine print can alert you to possible future headaches. Will a single late payment trigger a steep rate hike (a "penalty APR")? Will new purchases face steep interest charges? (Typically, only the transferred balance enjoys the 0% rate, and new purchases generate interest as usual.)
Remember to crunch some numbers to find out just how good a balance-transfer card's proposition is. If the card charges 0% interest for the first 18 months, that's great. But if it also charges a balance transfer fee of 4% on the $20,000 you're transferring, that an $800 charge. Make sure your savings on interest will make the cost worthwhile.
Balance-transfer cards can help you simplify your financial life, too, if you consolidate debt from several cards onto one low-rate card. Learn more about credit cards and check out some recommended ones at TheAssent.com and IndexCreditCards.com.
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