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A Guide to Balance Transfer Credit Cards
If you’re trying to pay down debt and get financially fit, one of the best things you can do is transfer your outstanding balances to a 0% APR credit card. This way, the entire amount you pay each month will go toward paying your debt down, not toward interest.
Many credit card companies offer balance transfer cards with promotional 0% APRs for an introductory period of time. But how do you find the one that’s right for you? This short guide to choosing a balance transfer credit card will tell you what to look for and explain the terms you may see when shopping around for a great offer.
First, look at how long the offer lasts. Some 0% APR offers last six months, some last nearly two years, and many fall somewhere in between. Obviously, the longer the offer lasts, the easier it will be to pay off your entire balance during the no-interest period. However, it’s not the only factor to consider. It’s just one of many—but it’s definitely one of the biggest considerations. The longer you can get away without paying interest, the better.
Next, consider the balance transfer fee. The days when there were many offers for no-fee balance transfers are behind us, and almost every balance transfer card now has one. This fee varies from card to card but is generally around 3% of the balance, with a minimum of $10. If you can find a no-fee balance transfer offer, go for it. However, if you can’t, then make sure the fee isn’t more than 5%–and preferably less than that. If you’re transferring a large balance, this fee can be significant, but the savings from not paying any interest will be worth it.
Think about rewards. When you’re paying off a balance with a balance transfer card, it’s better not to use your card for everyday purchases. But once you’ve paid off your debt, it would be nice if the card you choose continues to be of use to you. Choose a card that comes with cash back, miles, points, or some other type of rewards, and chances are your new credit card will be one of the go-to cards in your wallet for years to come.
Check out the ongoing terms and conditions. Once that 0% APR offer ends, what will your ongoing interest rate be? Ideally, you’ll end up with a new credit card that has a low APR, great rewards, and other benefits that are important to you. Will you travel overseas frequently? Then you might want a card that has no foreign transaction fee. Look over the terms and conditions of the card carefully and make sure this card is one that offers more than just a balance transfer offer.
Last but not least, once you have that card in hand, make sure you pay the minimum amount due by the payment due date each month. If you make even one late payment, you could lose your promotional APR, which would defeat the purpose of making the balance transfer in the first place.
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