Should you transfer your credit card balance?

When you’re faced with a stack of credit card bills and struggling to make a dent in your debt, transferring your various balances to a single credit card with a low interest rate immediately seems like a smart solution. A credit card balance transfer can be a viable way to consolidate your balances and pay off what you owe quickly, but there can be caveats and it may not be the right move for every borrower.

There are a several factors you should consider prior to transferring a balance to avoid doing more harm than good.

1. How long is the promotional offer

Most lenders offer a zero percent interest rate for a period that may span six months to two years to attract customers to transfer a balance. It’s important you not only know how long the promotional period lasts, but are certain that you can repay the entirety of your balance before the rate ends. Otherwise, you might end up with a higher interest rate than the one you were formerly assigned.

2. Are there any fees to transfer the balance?

A zero percent interest rate can be tempting, but watch out for fees that may come with the new credit card. It’s not uncommon for lenders to impose a flat fee or a charge that is calculated as a percentage of your balance. In some cases, they may charge both. Make sure you understand the terms of the contract and calculate how much will be added to your balance in fees. In some cases, high transfer charges may outweigh any benefits you would have earned by transferring your balance, so steer clear of these cards.

3. Can you realistically make minimum payments?

Doing the math and being certain that you won’t fall behind on payments is crucial for a balance transfer card. In many cases, borrowers who are late on a payment may forfeit the zero percent interest rate and prompt the standard or penalty rate to kick in. This can not only derail any progress made on repaying debt, but can leave borrowers with high interest rate.

4. How will new charges be applied?

Making new purchases while trying to eliminate debt can set you back, but if you must do so, it’s important to know how they will be assessed. In most cases, the zero percent rate only applies to the balance that was transferred, while any charges made with the card will fall under a standard interest rate.

Transferring a balance can be an efficient way to pay off credit card debt quickly, and weighing the pros and cons of different products can help you make the best decision for your unique needs.