Balance transfer cards can save you money, but is it always guaranteed?

Balance transfer credit cards offer low promotional rates for balances transferred from another credit card. For instance, a balance transfer card could offer you a 0% interest rate for 15 months on up to $5,000 in transferred balances. If you moved money from one of your old cards to the new card, you could pay 0% for a year on up to $5,000 worth of credit debt.

Because these cards eliminate interest costs for a period of time, it can be easier for you to pay whatever you need to and in a convenient order. But, it’s important to remember this drop in interest rate is only temporary.


The Downsides

Lots of people think that the main downsides for these cards are that they charge a fee for the transferred funds—usually around 3% for a transfer. But these fees are openly disclosed and if you’ve done your research, shouldn’t prove to be a surprise. In fact, as you won’t be owing any interest over the course of the year, they can actually seem well thought out.

The bigger downsides are found elsewhere though. The 0% introductory rate is only temporary, and the minimum payments are not high enough for you to pay back the full transferred amount before this promotional rate expires. The big catch with these cards then, is that while you’ll be on a zero-interest rate for a period of time, this won’t last. When it does expire, the benefits you thought you were getting could end up catching you out.

The standard interest rates of balance transfer credit cards can be very high and any balance on your transferred credit card debt that remains at the end of your promotional period will be subject to this higher rate, potentially setting a trap for you. You could still end up paying a lot of money when this rate expires and if you’re not careful, you could end up owing a near fortune in credit debt. It’s even possible that that your rate may be higher than it was on the card you originally transferred from.


Avoid Interest Rate Spikes

These cards are a classic case of introductory and promotional offers catching new customers, but with potentially spiking interest rates. The best way to avoid any mismanagement with these transfer cards is the same as always. It’s important to figure out how much you need to pay to get your transferred balance down to zero before you’re the standard interest rate kicks in. With the right planning, these transfer credit cards can be useful additions should you need them, but that doesn’t mean they are risk free.

If you’re not able to repay your balance before the 0% interest ends and this rate then shoots up beyond the card that you’re currently transferring from, these are cards may not be the best option for you.

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