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How do I Evaluate Balance Transfer Offers?

Tiffany Manley
Tiffany Manley

In order to facilitate paying off credit card debt sooner, you might decide that doing a balance transfer would be one of the best options for you. Many balance transfer offers exist, so it is important to learn exactly what you should be looking for when evaluating these offers. To determine which balance transfer offers you should use, research the promotional interest rate being offered, the interest rate offered after the promotional period, the length of the promotional period, the fee charged to complete the balance transfer, any annual fee and whether new charges are covered by the promotional interest rate.

One of the biggest draws of balance transfer offers is that they offer a promotional interest rate. This usually is a deeply discounted rate that might entice people to transfer balances from cards with higher interest rates to the promotional card. When deciding whether the card is right for you, it is important to familiarize yourself with exactly what the interest rate will be. This will help you make an educated decision about whether the balance transfer is a smart move. One good rule is to look for a rate that is at least three to five percentage points less than what you currently are paying.

Businessman with a briefcase
Businessman with a briefcase

If you feel that you will be unable to pay off the balance of the credit card prior to the promotional interest rate ending, or if you think you might hold onto the credit card for additional uses, finding out what the interest rate will be after the promotional period ends might be a good idea. Some companies leave the rate about the same as the promotional rate, and others substantially increase the rate. Knowing this information is an important step in evaluating balance transfer offers.

It also is important to learn about the length of the balance transfer promotional period. This is the period of time that the credit card issuer will allow a substantially lower interest rate than normal. You can then use this information to determine whether you will be able to pay off your balance transfer within the allotted time.

Many credit card issuers charge a fee to complete a balance transfer. When evaluating balance transfer offers, look for ones that charge a small fee — or no fee at all — to complete the transfer. Your goal is to pay off your debt in as short a period as possible and to pay as little interest as possible, so adding as little as possible in the form of fees is advisable. It also is best to avoid any annual fees, if possible. If you must pay one, look for a low annual fee.

Finally, if you feel that you might use the new card for future purchases during the promotional period, find out whether they will be covered by the promotional interest rate. It is better to have this information and know what type of interest you will be paying than to assume and to be wrong. Being unexpectedly charged a much higher interest rate can add immensely to the debt you have.

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