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Balance Transfer Credit Cards: Seven Key Questions to Ask

by Barbara Marquand

A 0% balance transfer credit card can be a sensible way to pay off debt and save on interest. After all, what could be better than borrowing money for free?

But there are catches. For one, the credit cards are not free--there is usually some kind of fee involved; and two, if you are not careful, you can fall into the trap of opening the spending gates, only to get awash in more debt.

Here are seven key questions to ask if you are thinking about transferring a balance to a credit card with a low introductory rate.

Credit Card Rates

1. Do I qualify? Advertised credit card rates are not guaranteed for every customer. Only customers with the best credit scores qualify for the best rates, so don't count on the introductory zero-percent interest unless you have great credit.

2. What is the introductory rate? Look at not only the introductory rate presented, but whether it applies just to balance transfers or to purchases as well, especially if you plan to use the card for any spending. Find out how long the rate will last.

3. How much is the interest rate after the introductory period? After the zero-percent introductory period, rates can zoom up to 18 percent or more.

Credit Card Fees

4. What is the balance transfer fee? Do not overlook this cost. A 3 percent balance transfer fee--not uncommon among some of the top-rated balance transfer credit cards--would cost you $300 to transfer a $10,000 balance. Some cards have a minimum and maximum amount you pay for transferring the balance.

5. What is the annual fee? Sure, zero-percent interest is great for a few months, but if the credit card comes with a hefty annual fee, the deal may not be worth it.

Credit Card Terms

6. What other features does the card offer? Compare the credit card terms, such as cash-back and other rewards.

Credit Card Use

7. How will I use the card? If you want the card to help you pay off credit card debt, make sure you have the discipline to resist using it to go on spending sprees. That zero-percent introductory rate will not do you any good if six months later you have more debt than you started with.


Published 02/02/11 (Modified 02/03/11)

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