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Are you fed up of a number of debts along with a credit card loan and are finding no way out? We can understand that you are in a tight position wherein you are not allowed to look anywhere for help. But you might not know and can have a great relief that there is indeed a way out and it’s a balance transfer credit card!
What is it? Well, a balance transfer credit card can help you consolidate and pay off all your current credit card loan and other debts.
This is not actually a new concept, but was a bit left behind; but now it’s making a powerful comeback as credit card companies like MasterCard and Visa are using it as a promotional tool and are offering zero interest on their balance transfer credit cards.
If, in such a case, you have a lot of credit card loans which you are finding difficult paying off monthly, and also if you have other debts in the form of gas, grocery and department store bills to pay, you can have the convenience of one consolidated loan through a balance transfer credit card. It’s definitely more comfortable than paying off a number of loans per month.
So, if you are convinced about the convenience of such a card and are planning to apply for one, here are a few things you should consider.
1. Shop Around
It’s extremely important to shop around and know about the terms and conditions of various companies that are offering these cards. Particularly you should compare the different interest rates, transfer fees and grace periods for the zero interest.
You should remember that although a few companies offer a same interest rate, most others don’t offer them equal. So also, the zero percent interest rate is only limited for a certain time period.
Along with doing a Google search for various credit card companies, it’s also a good idea to research your nearby credit unions.
2. How is Your Credit History?
Before applying for a balance transfer credit card, have you taken a look at your own credit score? Remember that credit card unions and companies that offer zero interest balance transfer cards are often keen about accepting only clients that have an excellent credit score. If your credit score is below the required range, they may place a limit on the amount you want to transfer. Thus, if you want to transfer $7,000, but if your credit score is low, you may be able to have credit card balance transfer only up to $3,000, 4,000 or 5,000, as per the limit set by the company. This will compel you to keep the balance money with your previous card and continue to pay it off. Thus you will have to make two payments instead of one, which can be even more burdensome for your budget and may beat your purpose in the first place of getting the balance transfer card.
3. Zero Interest Matters
You may or may not realize but the zero interest is important. You can save a significant amount on interest when you transfer your debt to the zero interest balance transfer card. However, you should also remember that it’s not forever. It could end after 6 or 12 months or a little longer. And once it ends, the interest rate could jump anywhere from 12% to 18%. You should inquire about this before you sign any documents.
4. Transfer Fee
Final important point to consider is the transfer fee which is typically around 3% to 5% of the balance you want to transfer and around 90% card issuers charge it. Depending upon the interest rate, it may or may not be worth transfer your balance once the zero interest expires.
All in all, whether the balance transfer credit card helps your budget or not, depends on how keenly you read the fine print and how carefully you consider the pros and cons. Use the above tips to make an informed decision and make the most of it!