In theory, credit card balance transfer offers can help you save big by offering you zero percent interest on transferred balances for a limited amount of time (generally six to 12 months). If you feel your monthly interest charges are preventing you from making significant headway on paying down your credit card debt, these offers can be especially appealing.
However, it's important to understand the specifics of these offers before you sign up for a new credit card, or you might unknowingly end up paying a premium interest rate on all of your transferred balances - regardless. You could also get hit with transfer fees and other incidental charges that can add up fast.
When you're reviewing the terms of a new credit card offer, be sure to make a mental note of...
- The introductory interest rate
- The length of the introductory interest rate offer
- The interest rate you'll be charged once the introductory offer expires
- Applicable balance transfer fees
As with any credit card offer, it's important to make sure you understand what happens in the event that you're late with a payment or miss one altogether - especially as that information pertains to your special introductory offer. It's also important to look at your budget to be certain that you'll actually be able to pay off your balance before the intro offer expires, or else you might be required to pay interest on the full amount transferred, as if the introductory offer never existed.
For these reasons, you should only take advantage of such credit card offers if you can commit to making more than the minimum payment required. If you can't afford to attack your balance more aggressively than you were before, you're only giving yourself a temporary respite from interest charges. Reexamine your household budget and see if you can reroute some of the more discretionary spending money towards your credit card bills.
If you have an empty credit card or two left after you've made your transfers, it's generally better for your credit if you keep them open. Making minimal purchases that you can pay off regularly each month before interest accrues, can be a great way to bolster your credit score. If you feel that leaving an empty credit card sitting around will be too much of a temptation, however, it may be in your best interest to close the account altogether.