Balance Transfer Setbacks

While credit card balance transfers can save you a lot of money, it’s important to note that there are some common setbacks as well. If you’re currently paying finance charges associated with a credit card balance, you should consider executing a balance transfer. Just take heed of these setbacks.

Balance Transfers Carry Fees

Most balance transfers these days involve a balance transfer fee. The fee, which ranges from $5-$75 or even higher, can take its toll, especially if you transfer a large balance. Keep in mind that there some no fee balance transfer credit cards out there, though offers have greatly diminished as credit card issuers recently toughened up.

In fact, some credit card issuers such as Citi now require cardholders to pay back the balance transfer fee as part of the first minimum payment.

Balance Transfers Are Limited

Many balance transfer offers will lower your APR, but only for a certain period of time such as six or 12 months. While this may be enough time to pay off your existing balance, for some, they may need more time. This will usually lead consumers to open a new credit card to transfer the balance, or face steep finance charges again. If you know it’ll take a while to pay down your balance, consider a credit card with a low fixed interest rate for the life of the balance.

The American Express Clear has no associated balance transfer fee and comes with a fixed interest rate of 4.99% for the life of the balance if completed at time of application. Before you apply, make sure that’s still the current offer.  It’s not a fixed rate credit card, only the transferred balance enjoys that privilege.

Balance Transfers Don’t Always Work

Sure balance transfers are great, but they don’t work within the same bank. Say you’ve got a balance with Citi and you get a balance transfer offer from Citi. You can’t use that offer, as it wouldn’t make sense for the same bank to transfer your balance to a different account within the bank at a lower rate. So make sure you transfer amongst different banks.

Most balance transfers also require a credit pull, and if your credit score isn’t up to snuff, you may be denied, just as you would be denied on a typical credit card application. So don’t rely upon balance transfers if your credit isn’t in good shape, as denial is a possibility.

All that said, weigh your options to see what works for your unique situation. Balance transfers can be a great tool, but can also be a poor decision in certain circumstances.

Related Topics:

1. Citibank Now Charges Balance Transfer Fee on Most Credit Cards
2. Watch Out for Hefty Balance Transfer Fees
3. Choosing a Balance Transfer Credit Card
4. Is the No Fee Balance Transfer a Dying Breed?
5. No Fee Balance Transfer Credit Cards