Balance Transfer Offers – What you should know

The credit card market is flooded with balance transfer offers. For those who have existing credit card debt, these offers are very hard to resist. With offers ranging from 0% for 6 months to 4.9% for the life of the balance there’s something that’s sure to appeal to almost everyone.

Whilst balance transfers can be just the thing to help you get back on track, you should be aware that there are indeed some pitfalls that can put you into more debt than when you started. The key to making the most of these great offers is to be completely informed, and make sure that you completely understand the terms of the agreement.

You should be able to answer the following list of questions before accepting any balance transfer offers:

• What is the duration of the balance transfer offer ?
• What is the balance transfer % being offered?
• What will the interest rate revert to when the balance transfer offer ends?
• What will the rate be for new purchases and cash advances?
• Are there any fees to take out the balance transfer?

What is the duration of the balance transfer offer? Most balance transfer offers last for 6 months with a couple of providers offering 12 – 18 months. There are also a few providers offering balance transfers for the life of the balance. Usually you will find that the shorter the duration, the lower the interest rate will be and vice versa.

For these offers to be effective in reducing your current debt, you need to be certain that you can pay off all or most of the transferred debt within the specified time period. If much of the debt still remains at the end of the offer period, it usually reverts to the standard variable rate of the credit card which could in fact be more that you’re paying now. If you think that you’re unlikely to reduce the debt substantially, you would probably be better off looking into a good low rate credit card.

What is the balance transfer % being offered? You can’t beat a balance transfer offer of 0%. However, these offers are usually only for a duration of 6 months. If you are not certain that you can significantly reduce the transferred debt within this time period, then you would be better off considering a balance transfer offer with a little higher interest rate over a longer duration. This would give you a more realistic chance of clearing your debt whilst still enjoying a low rate.

What will the interest rate revert to when the balance transfer offer ends? This is impossible to know for certain. Although, you can probably get an idea by comparing the current interest rate for the particular credit card with other cards on the market. How does it compare?

What will the rate be for new purchases and cash advances? Most credit cards offering balance transfers usually have a higher interest rate for new purchases and cash advances. For this reason many people use the card solely for the balance transfer and don’t plan on using the card. You would be better off applying for a balance transfer card, coupled with a good low rate credit card for new purchases. Cash advances are usually a much higher rate again than the standard interest rate and should be avoided unless absolutely necessary.
Are there any fees to take out the balance transfer? Check to see whether there are any fees or charges for taking out the balance transfer offer. If there are, make sure that these fees do not negate any benefits that you will gain.