How to Tell if a Balance Transfer Credit Card is a Suitable Option
When working on managing your finances and building a better budget, a balance transfer may be something you’re considering. There are many factors to think about before deciding if transferring your balance from one card to another is right for you. Do your research with sites like CardGuru and consider the following:
Understand a Balance Transfer
A balance transfer is simply transferring the balance from one credit card to another. This is usually done because of a lower interest rate offered. There are often introductory periods with some cards providing zero interest on balance transfers for a certain period. This can be an excellent way to save time, money and even pay off a large purchase quickly. There are times these transactions aren’t totally fee-free so read the fine print.
What Factors You Should Consider Before Transferring a Balance
One thing you’ll need to do when transferring your balance is give your new creditor confidence you will be able to pay it off. This means you’ll need a fair to good credit score, a bit of available money and proof that you’re in good financial standing.
One of the largest factors for credit scoring is that you make payments on time. The quickest way to lower your credit rating is by missing payments and you need a good score. You will also want to think about how you utilize your credit. You don’t want to have your credit balance too close to the limit as this will lower your rating. It can also lower your rating if you close accounts down too quickly. If you’re transferring a large balance from several cards to one card, it is wise to leave some of the cards ‘open,’ so your available credit is still substantial. This will look better for your FICO score.
Consider Your Goals
One of the things to keep in mind when deciding if a balance transfer is right for you, is what your goals are. Are you trying to get your finances in order to purchase a new car or a home? If you are, transferring your balance can help but only if you take precautions such as keeping your old credit cards open with nothing on them. This shows you are responsible with credit and that you refrain from using all available funds. You will also want to check your credit score to make sure there aren’t any items on there that don’t belong. If your credit is maxed out, timely payments won’t count for much because you’ll still be penalized.
Are you looking for short-term savings in your budget? In this case you need a card with a low rate and a long introductory period without interest. Then you consolidate as much of your other debt to the card with zero-APR. This will free up your budget. You will want to be careful though, if you don’t pay attention to paying these off, you can get a snowball of back interest at the end of your introductory period.
In short, before deciding if the balance transfer is right, take the time to thoroughly understand the fine print, such as how and when interest accrues, and any other fees. Consider what your financial goals are and then plan accordingly.