The Pros & Cons of Transferring Credit Card Balances
There may come a time in your life when you realize that your credit card just isn’t working out for you. It could be the company itself, like how they deal with certain problems and so forth, but it could also be for other various reasons, such as high interest rates or annual fees. Many people find themselves searching for credit cards that offer low, introductory rates and no annual fees so that they can pay the balance off quicker. Transferring credit-card balances isn’t a bad idea, but the pros and cons should be considered before making a final decision.
Pros of Transferring Credit-Card Balances
- By doing so, you can possibly get out of debt faster since the amount of interest you are paying is lowered for a number of months or even years. This is one of the main reasons why people transfer credit-card balances so that their monthly payments go towards the actual balance and not interest.
- You can receive better terms if your current credit card has high fees and/or short grace periods. Typically, new transfers on a credit card will involve no annual fees, lower fees (i.e. cash advances) or even rewards that can go towards airline miles or a cash-back program.
- If the credit limit on the new credit card is high enough to take on many credit cards, you could lessen your worry about paying multiple accounts by transferring all of them into a single credit card account. This will help you avoid late fees or penalties. It can be tiring and just downright depressing when you have to pay on several different credit card accounts, so being able to transfer everything into one is highly beneficial to your health and credit score in the long run.
Cons of Transferring Credit-Card Balances
- If you are transferring your credit-card balance to a card that has a low introductory rate, then be sure to pay off that balance before the promotional period ends because you could end up with higher fees than you originally had. Make a financial plan that is solid so that you can advantage of the promotional period. By doing so, you’ll be able to pay your debt off faster.
- Most credit cards have balance transfer fees, so consider this before selecting a credit card. Some are 3 or 5 percent of the current balance while others charge a flat fee. This can get expensive if you are finding that you need to constantly transfer your credit-card balances.
- Your credit score could be at risk simply because anytime you have a credit card that is being reported on your record that is more than 30 percent of your income, it lets lenders know you are a risk factor.
Before making the final decision whether or not to transfer a credit-card balance, do thorough research so that you can obtain the best possible deal. Look for credit cards that have great terms that extend the introductory period so you aren’t meant with any surprises once it is over. Above all else, look over your finances and make the tough decisions it will take so that you can get out of debt faster.
Nick Thomas is a keen blogger who writes about personal finance and entrepreneurship for everyone on www.debtconsolidation.com.au. He also provides information about the top consumers issues and investments.