One of the more common debt reduction methods is to transfer a balance to a 0% APR credit card, and then pay it down without the interference of interest charges to slow your progress. However, not all balance transfers are created equal, and you should understand the terms before you proceed.
Card Hub recently released an interesting look at balance transfers, and here are some of the things you should keep in mind as you consider transferring your high rate balances:
1. Credit Issuers Have to Wait 10 Days to Process Your Request
You might be annoyed at the slow progress made by your new credit issuer when it comes to balance transfers, but there’s a reason for it: The law. One of the results of the Dodd-Frank Wall Street Reform and Consumer Protection Act is that credit issuers need to provide consumers time to reconsider the account terms and cancel the balance transfer request. This means that the issuer must wait 10 days after approving your credit card account to actually go through the balance transfer.
2. Some Credit Issuers Process Partial Balance Transfers
What happens if your balance transfer request exceeds your new credit limit? It depends on the credit issuer. According to the report, some credit issuers will reject the balance transfer request altogether, while Bank of America, Barclaycard, Chase, Citi, Discover, and Wells Fargo will process the transfer up to your credit limit. So you at least get some of your high rate balance moved over.
If you are concerned about this issue, check with the credit card issuer to find out what the procedure is. You don’t want to miss out on a partial balance transfer that might help you.
3. You Might Be Able to Transfer All Sorts of Debt
In many cases, we think of balance transfers as being limited to credit card balances. However, the reality is that some issuers will actually let you transfer other types of debt to your 0% APR card, allowing you to save money by moving some of it around. Find out what types of debt you can move using your new credit card. You might be able to transfer payday loans, auto loans, student loans, medical debt/expenses, small business loans, and even mortgages.
However, you need to be careful. Some of this debt is rather large, and if you are still paying on it when the 0% APR runs out, it could be more expensive in the long run — especially if you factor in balance transfer fee that most credit card issuers charge.
4. You Can’t Always Hop from 0% Card to 0% Card
One of the ways that some consumers stave off the inevitable rate increase at the end of the introductory period is to move to another card, transferring the balance. However, that might not be an option. In some cases, you might start being denied if issuers run your credit report and see a pattern. Another issue is that you might not always qualify for 0% APR offers. Plus, as the report points out, following the financial crisis these offers all but disappeared. That could happen in the future as well. Plan out how you will repay your balance transfer before pulling the trigger.
5. Don’t Expect Rewards on Your Balance Transfer
While some credit card issuers will give rewards on balance transfers, many of them don’t. The report from Card Hub indicates that only three major credit card issues occasionally offer rewards on balances. So, if you transfer, you can’t expect your transfer to be treated as a purchase for rewards purposes or cash bonus purchases.
Click the following link to find recommended balance transfer credit cards.