Top Reasons to Avoid Balance Transfers
Balance transfers are offered to customers with good credit ratings at unbelievable interest rates – some with the rate of 0% not only the amount being transferred, but on purchases as well! These offers are made from six to eighteen months, depending on the terms of the deal and how much the credit card company is trying to sweeten the deal with the potential card holder.
Although these balance transfer deals can be great tools to give the consumer a chance to repay the card, directly to the principal. They are often referred to traps by experts. There are many reasons that these types of offers should be discarded and here are a few reasons why:
The Interest Rate Shoots Up After the Introductory Period
After the introductory period; the interest rate can rise upwards of fifteen percent. If you are a consumer with good credit history than chances are you are going to be faced with a higher credit card interest rate than the card that was being transferred from. Is this really worth it? Even worse, if you don’t have the balance paid in full, the debt will accumulate interest faster than the original credit card was tallying up.
Most Consumers Don’t Repay the Card within the Term
Seeing as most consumers don’t create a plan to repay the balance of the card within the 0% interest term, they are going to be faced with a higher interest rate (most likely, higher than the original card). You should never transfer your balance to a lower interest card for a time limit introductory offer unless you intend to pay the complete balance within the introductory period. This is essential to maintain your financial health.
0% does not Mean 0 Fees
Many customers are unaware of the fine print that states the fee schedule which are associated with balance transfer. The majority of companies charge upwards of 3% of the balance which is being transferred. If you are transferring a hefty sum, beware of this charge that is going to appear on your first statement. Can you create a repayment plan that can save you this fee, combined with the interest that is going to be charged to the card?
Preserve Your Credit Rating
New accounts can deplete the history that exists on your credit report. It is important to limit the amount of new accounts that are opened to ensure this history is full of information. Transferring the balance is not going to improve the credit rating, taking measures to repay the balance is the only way to do that!
comments
You got something to say?