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Transferring your credit card balance? |
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Thursday, 17 January 2008 |
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Credit card companies may advertise attractive sounding offers for a new credit card if you transfer your existing credit card balance to them. Make sure you get the full picture before you make the move. Otherwise, things may turn out rather differently from what you expected.
Four questions to ask your new card issuer
Ask these four questions if you are thinking about transferring your credit card balance to take advantage of an attractive introductory interest rate.
1. What's the standard interest rate?
After the introductory rate comes to an end, you will pay the standard interest rate on outstanding balances for new purchases or cash advances. If the standard interest rate is higher than your current credit card, it may be not be worth changing cards. 2. Does the special introductory interest rate apply to all purchases or cash advances during the introductory period? Or does the special rate apply only to the balance transferred? Introductory rates may apply only to the balance transferred. So any new purchases or cash advances could be charged at the standard interest rate, even if you bought them during the introductory period. 3. Will you pay off my existing credit card account immediately when I join up with your company's card or will there be some delay? Some consumers have faced delays between the transfer being approved and the amount being credited to the old account. This means that they have had to pay two sets of interest while the transfer takes place.
Paying interest on both cards for a week or two could wipe out much of the saving achieved with the lower introductory rate.
Check the fine print for this possible pitfall that could apply to offers that: - start charging you interest from the date your new credit balance transfer is approved, but also
- require you to go on making payments on the account from which you transfer your balance until that account has been credited.
4. What credit card limit will you give me if I transfer over? The credit card issuer may approve a credit limit that's lower than your balance transfer amount. In this case, you could end up with a new credit card without your balance being fully transferred. You would have the costs of two cards, without the benefit of the low introductory rate on the intended balance transfer. Two questions to ask yourself An introductory interest rate is only one aspect of a credit card. The benefits of your current credit card may outweigh the short-term benefits of an attractive introductory rate. 1. How will the costs and benefits affect me? Depending on how you use your credit card, the standard interest rate, annual fees, interest free period and rewards can affect you differently from other people. Make sure the offer will really suit your own needs. 2. Can I find a cheaper way to borrow money? If you borrow money on your credit card, you'll know that credit cards usually charge the highest rates of interest.
If you need to borrow larger sums of money for more than 6-12 months, see if you can borrow it more cheaply, for example through a personal loan. Take advantage of information available on websites or newspapers and to see what's on offer. Take your time Take time to go through the fine print of any offer you find attractive. This will save you from any surprises after you are committed to a new credit card. Ask the credit card issuer more questions if you are unsure about any details of their offer. |
