What You Should Know About Balance Transfer Fees

2007-07-24 08:31:47

( Financial )



What are Balance Transfer Fees?

There are two main reasons to do a balance transfer. Credit card companies charge steep interest rates for your outstanding credit card balances. However, interest rates also vary by company and some have seasonal promotions where they offer very low interest rates. Transferring your outstanding card debt balances to another card company will enable you to take advantage of the lower interest rate. Your new creditor will settle all your old existing debts and consolidate them all into one account.

The second reason for balance transfers is to allow you to consolidate all your credit card accounts into one place with one low rate, so that you will be able to service them more efficiently.

In the balance transfer process, the company that will now bear your debts will charge you a balance transfer fee, a one time fee which is usually about two percent of your debt balance.

Advantages and Pitfalls of Transferring Your Debt Balance

The obvious advantage of balance transfers is that you will save on interest charges, especially if you avail of the zero percent interest offer. If you are lucky enough, you may even find a company which will offer you no fee balance transfers for a qualified amount of debt balance.

While zero percent and no fee balance transfers may be very enticing, most companies require you to pay the entire balance within a specific period of time. If you are unable to do so, you will then need to pay corresponding interest and balance transfer fees.

Ultimately, the constant availability of attractive balance transfer offers may cause you to be a habitual borrower who will never pay off all your debts. This causes a dangerous tendency for your debts to keep piling up and eventually become unmanageable. When that happens, you could find yourself lined up for bankruptcy.

Tips and Strategies about Balance Transfers and Fees

Before you actually transfer your debt balances, read the fine print first on the agreement. Shop around carefully not just for the lowest fees but also for reasonable terms and conditions you can live with.

Balance transfer fees usually have a ceiling amount, so you might be paying the same amount regardless of your debt balance.

Make every effort to comply with the grace periods and other terms set by the lender. You need to be prudent in looking around for another lender just in case you might not be able to comply with the terms of your present lender.

Ultimately, you should look upon balance transfers as only a temporary means of helping you to manage and repay debts, and not as just another excuse for not paying your debts on time.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.