After reading about the basics of credit card balance transfer and discovering how to use balance transfer to decrease the interest you’re paying on your credit card significantly, you may now be tempted to do it right away. Before you do so, we want you to consider some important points in order to make the right choice:
Is the Introductory Interest Competitive?
Usually, credit card companies offer an lower introductory interest rate for new balance transfer customers. Those tend to be much lower than standard interest rates, but they only last for a certain period of time. Lets say you’re incurring 24% interest at the moment, then an introductory interest rate of 6.24% for one year would mean that you’d be saving more than 17% in financial charges over the course oft he next twelve months! Keep in mind that some banks actually offer an introductory interest rate of 0%, so do your research. You should also calculate the time needed to completely pay off your loan assuming the introductory interest rate would be valid for that period, because many banks charge standard interest rates after first 12 months.
How Long Can You Benefit From Lower Interest Rates?
It depends on the credit card company to decide how long you can enjoy the introductory interest rate. Usually the introductory interest rate is valid for 6 months in Singapore. When you choose a credit card to transfer your balance to, make sure you pick one that offers the longest introductory period possible. Because only a few months of low interest or no interest can make a big difference in your total bills.
How Much Better is the Interest Rate?
After your introductory period ends, you will have to pay normal interest rates comparable to the one on your existing credit card. Therefore, always compare the standard interest rate of your new credit card with your current one. If you want to carry a balance beyond the introductory rate period, you risk worsening your debt in the long run if you chose a credit card with a higher interest rate.
What Fee Applies to the Balance Transfer?
Usually, balance transfers are NOT FREE of charge. So, when you go through with a balance transfer, your new credit card company typically charges an upfront fee of around 2-4% of the amount you want o transfer. Be careful to take this into account – as you might be saving a lot from your low introductory rate, but at the same time taking a beating from the balance transfer fee!
Do I Qualify?
Just because you see an ad promoting “0% Interest Rate” does not mean that you would automatically qualify for it. When you’re looking for a good credit card to undertake a balance transfer, make sure to inquire to ensure that you’re qualified for the low introductory rate and will actually get it.
Have You Read Through the Fine Prints?
As it is with everything, always read the fine prints. It is better to be safe than sorry.
Like this article? Then you might also like to consider a more detailled explanation on what you should know about balance transfer credit cards.
Want the best financial deals in town delivered to your inbox once a month? Sign up for iMoney’s Monthly Round-Up today!