Credit Card Quicksand: Three Things to Consider Before Transferring Balances

Transferring high APR credit card balances to new cards with a low (or no) introductory rate can help in managing debt. If you have the willpower to avoid charging more after you've made balance transfers, you can make such transfers work in your favor, but there are a few things to be aware of.

Managing Debt without Getting in Deeper

If you have good credit but are uncomfortable with the amount you owe, you may be tempted to open a new credit card account and transfer all or part of your existing balances to the new card. Before you do this, be sure to check out the actual cost of the balance transfer. Although you may be offered no or low interest for a specified "introductory" period, additional fees can rapidly increase the cost of making balance transfers. Look for the annual percentage rate (APR) posted on the balance transfer offer. The APR is the amount of all finance charges (not only interest) calculated as an annual interest rate. Be vigilant and read balance transfer solicitations carefully to avoid:

• Balance transfer fees: Let's say you want to transfer $10,000. This isn't such a great deal if the credit card company is charging a balance transfer fee and/or annual fee for the new card. A balance transfer fee of 3% on a balance of $10,000 is $300.00.


• Introductory rates that skyrocket in a few months: Read the fine print to discover how much the interest rate and/or APR can increase. Generally, it's a good deal to transfer balances that you can repay before the introductory rate expires, but many people find that they can't do this, or they continue using their credit cards.


• Fees and more fees: If the amount transferred stays at or near the credit limit, you could risk being charged additional fees; credit cards can rack up fees for paying late, using too much of your available credit, and your old credit card company may impose a fee for transferring your balance to a new card! Fees and other finance charges are added to your balance; if you can't pay off the balance each month, your balance may increase instead of decrease if you're making minimum payments and/or paying late.

Credit Cards are Tempting: Do You Have Enough Willpower?

Debt management requires enough willpower to avoid using credit cards while you're repaying debt, especially when you're transferring balances. Unfortunately, using credit cards can be too convenient, and it's easy to find yourself owing more than you did before opening a new account and transferring balances from existing card(s).

If you're too deep in debt and can't resist using credit cards, a non-profit credit counseling agency may be able to help.

Source:Losing at Balance Transfer Roulette

About the Author:
Karen Lawson started writing stories about birds and surfing at an early age. For more than ten years, she enjoyed a productive corporate career in mortgage banking before moving to Reno, Nevada in 1997. Karen earned BA and MA degrees in English (specializing in writing) at the University of Nevada. Significant areas of research and writing include truth and ethics in creative nonfiction, medical humanities, and the symbolism and lore of birds in American literature and culture. Karen has taught English at a community college, is writing a collection of poetry, and enjoys birdwatching and walking her basset hounds.