When to Consider a Credit Card Debt Transfer
With the new credit card laws just weeks away, you may have noticed some changes in you recent credit card statements.
The big credit card companies have been testing new offers and making adjustments to terms as they try to find new ways to make money under the new laws. The most commonly affected areas: Interest rates, annual fees and rewards point.
So it’s possible you’ve seen some significant changes in your credit cards. And, you may have even received new offers from companies hoping to lure you over with an attractive balance transfer offer.
A balance transfer is an old tactic companies use to try to get you to switch your business. For example, if you have a Visa card with Chase, CapitalOne may offer you a “balance transfer” special to move your Visa account to them.
Typically, these offers include no interest rate for a certain period of time, like one year or six months. This may seem attractive, particularly if you’re paying high rates now.
But, as always the case with credit card debt, the fine print is important.
Beware of Balance Transfers
Before you agree to a balance transfer, pay close attention to:
Your new interest rate. While zero percent interest for a year might be great, what will your rate be when that time is up? In just a few months you could end up with a higher rate than before the switch.
Balance transfer fees. Typically, a company will charge you a balance transfer fee to switch your account. This fee used to be 3 % of the debt with a cap of $75 or $100. However, Forbes is reporting that many card companies are raising this fee to 4 or 5 percent. Also, Forbes says they are removing the $100 cap, meaning you’ll have to pay for the full percent.
Zero Interest Period. Here’s a classic case of fine print. You may be lured in by an offer of “12 months’ of free interest, but, according to Forbes, these are often best case scenarios. The offers are usually for “up to” 12 months, meaning you may actually get a much smaller interest free window.