Choosing a Balance Transfer Credit Card
When choosing a balance transfer credit card, there are a few important things to keep in mind. The most important aspects are APR, associated fees, and how long the low-APR rate is fixed or offered.
But before looking at the benefits of a balance transfer credit card, you need to assess your particular situation surrounding your credit card debt. This really comes down to whether you have a large amount of debt, or a manageable amount that can be paid off in a short period.
That said, if you’ve got a large amount of debt that will likely take a considerable amount of time to pay off, you may want to consider choosing a balance transfer credit card with a fixed rate for the life of the balance. This way you can secure a low rate, usually under 5%, and you won’t have to worry about the introductory period disappearing after 6 or 12 months. These low-APR balance transfer credit cards usually don’t charge a balance transfer fee either, so it’s a good choice for those with a large amount of debt. And you won’t need to apply for a new credit card in 12 months once your APR spikes up above 20%.
Keep in mind that most balance transfers come with a balance transfer fee, though there are still some no fee balance transfer credit cards out there.
On the other hand, if you’ve got a small amount of debt, you may want to consider a credit card that offers 0% introductory APR for the first 6 to 15 billing cycles. You should be able to find a credit card with 0% APR for the first 12 months if you’ve got decent credit, and if you feel you’ll be able to pay off the bulk of that credit card debt in 12 months, this is a great way to avoid paying any interest.
Remember to always consider the long and short term before jumping into a commitment. Decide how you want to tackle the debt. A 0% APR credit card may be enticing, but you may save more money if you stick with a super low APR credit card for the life of the balance. And if you continue to carry balances, you may run out of options or end up paying fees when the 0% APR period comes to an end. Be sure to factor in associated balance transfer fees, and don’t forget about the universal default rule.
A major part of credit card management is planning, and without a solid plan, you’ll likely run into trouble and wind up paying more than you originally anticipated.