Reading the Fine Print

Okay, no one enjoys reading the fine print. But this is one of those things you have to do. If you don’t, you could end up unpleasantly surprised at some point.

Granted, there’s a lot of legalese you have to trudge through, which can make you feel like you’re reading a foreign language. But hang in there! To make it easier, take a look at the list here so you know what to focus on while wading through the details.

You’ll find the information below in what’s called the “Schumer Box.” This is, literally, a boxed area in the disclosure statements that highlights the rates and fees.

Wondering how it got such an odd name? It’s named after Charles Schumer, a New York Congressman who was responsible for the legislation that required issuers to present the information in an easy-to-read table.

Unfortunately, the Schumer Box is referred to differently on each credit card’s website. It might be called something like "Terms & Conditions" or “Pricing & Terms." You might have to click around to find it.

Zero percent intro APR.

Ideally, you want a credit card that offers a zero percent intro APR on balance transfers. This means you don’t have to pay interest on your balance for a specified period of time.

Length of the introductory rate. Now, the length of time will vary, but it generally ranges from six months to 18 months.

Pay close attention to this number. If your goal is to pay off your debt before the intro period ends, then your monthly payment will be determined in part by the length of the offer.

Balance transfer fee.

Some credit cards will have a balance transfer fee. Credit cards with 0% rates for more than a year typically will have these. This is a percent of your transfer amount and the average fee is 3 percent. Anything above 3 percent is considered high.

So using the $10,000 example we used previously, you’d pay a $300 fee (10,000 x .03). Occasionally, you’ll see an offer or two that waive the fee entirely.

Time limit on the offer.

There are often time limits for completing the transfer. You might have only 30 days or you might have four months.

The "go-to" APR.

This is the interest rate you’ll have to pay on any balance you have remaining when the zero percent intro rate ends. This rate is typically the same as the purchase APR. In most cases, the APR is a variable rate, which means it can vary with the Prime Rate.

Often you won’t know what your go-to APR will be until you get approved for the card. But you can kind of guess what the range will be by looking at the current purchase APR.

For example, if the purchase APR for a card your considering ranges from 12.99 percent to 21.99 percent, you can guess that if you have truly excellent credit, you’ll end up somewhere at the lower end of the range, closer to 12.99 than to 21.99 percent.

If your credit is barely good enough for you to get approved, then you’re looking at the high end of the range. If your go-to rate ends up being on the high side, just let it serve to give you extra incentive to pay off your debt during the intro period.

Purchase APR.

Sometimes you’ll get a zero percent APR intro offer on both purchases and on balance transfers. But many times, it’s just for the balance transfer. As mentioned before, in most cases, the APR is a variable rate.

If you’re serious about paying down your debt, then don’t use your new card for purchases. Yes, even if you get rewards, just focus on paying down the debt. You’ll learn more about this in Section 6, Mistake #3.

Annual fee.

Some credit cards, especially rewards cards, have an annual fee. Many of the best balance transfer cards don’t have annual fees, though. But if you do choose a card that charges this fee, you need to factor that into your monthly payment.

Penalty rate.

Most credit cards have a penalty rate and they can be as high as 29.99 percent, and yes, it’s a variable rate. The triggers for the penalty rate are located in the Schumer Box and is called something like “Penalty APR and when it applies.”

Examples of triggers include making your minimum payment late, payments that are returned unpaid or exceeding your credit limit. Know what the triggers are for your card and don’t let this happen to you.

Calculator
The Balance Transfer Calculator

You can use the balance transfer calculator on this site to determine how much money you’ll save in interest expense on a particular card. You’ll also find out how much your monthly payments need to be so you can pay off your balance during the interest-free intro period.

Note: The calculations are based on the lowest interest rate available for o specific credit card. So if you have less-than-excellent credit, you’ll need to consider this when you choose a credit card..

Example: Let’s go back to our example from the first section. You want to transfer $10,000. If you choose a card with an 18-month intro period and a 3 percent fee, here’s the cost of the transfer and the amount you’ll have to pay each month to pay it off before the intro rate ends.

$10,000 x .03 = $300 transfer fee

$10,000 + 300 fee = $10,300 to pay off

$10,300 ÷ 18 months = $572.22 per month.

Now, let’s take a look at this example using the balance transfer calculator. On the home page, you click on “Calculate Your Balance Transfer.” You then end up on a screen that asks you to describe your credit as a range (limited credit, fair credit, good credit, and excellent credit).

Next, you choose the type of card (consumer, student, or business). Finally, you’re ready to input information about the balance you want to transfer.

The best part? The calculator does the math for you! Not only that, you’ll be presented with a list of credit cards that have terrific balance transfer offers. For each credit card offer, you’ll be given the amount of interest you’ll save as well as the monthly payment required.