If you are drowning in credit card debt, a balance transfer can help restore your financial health.
By consolidating your high-interest balance (or multiple balances) to a balance transfer credit card with a 0% introductory APR offer (usually 12-18 months), you can save money while eliminating your debt faster.
While balance transfer cards can be very useful tools, they also carry some risks. Each credit card has unique terms and conditions you need to understand.
In general, people tend to ignore the fine print when it arrives with their credit card or when they fill out their application. However, failing to read the fine print can end up being extremely costly. You could miss some important information, which could impact your credit at some point. You could lose your promotional offers or incur high fees.
What are Terms and Conditions?
When you sign up for a credit card, you agree to the card’s member agreement, which includes the terms and conditions. A credit card’s terms and conditions outline the rules and guidelines governing the relationship between card issuer and cardholder including fees and interest rates.
The terms and conditions also describe how the issuer will calculate your balance, what actions trigger the penalty and how payments are applied. If there are any bonuses or rewards connected to this card, they will be listed in the terms and conditions.
When Should You Read the Terms and Conditions?
You are responsible for everything in fine print, whether you understand it or not. You should read the terms and conditions before you apply for the card and again when you receive it. Don’t start using it until you have read them. If the text is too small or too complex, every Card’s terms and conditions must include a standardized table, called the Schumer box, which displays the most important information in an easy-to-read format.
What are the Balance Transfer Terms and Conditions?
While the interest savings on a balance transfer card can be significant, it is important to read the terms and conditions to understand the requirements associated with the promotional APR offer. For balance transfers, the terms and conditions lay out the requirements for the promotional APR rate and the consequences for not meeting the terms and conditions.
For example, with some balance transfer cards, you lose your promotional interest rate if you miss a payment, pay less than the minimum payment or make a purchase on the card. You can also lose the rate if you fail to transfer your balance within the specified time frame.Here are some of the details to look for in your card's terms and conditions:
Eligibility for Introductory Offers
Most credit card issuers do not allow balance transfers between their own accounts. If you have a Chase account, you will not be able to transfer the balance to a Chase credit card.
In general, if you opened a card from the same issuer with a promotional or bonus offer within the last 15 months, you are not eligible for the introductory 0% APR offer. This applies even if you closed the card or have a $0.
You may not qualify for the advertised APR offer. The APRs applicable to your account will be determined by our review of your credit report, information you provide on your application, and other relevant information available to us.
Introductory APR Offer
Be aware of when the 0% APR rate expires and what the rate will change to if you don’t pay off your balance within the promotional period.
To qualify for the introductory rate, a balance transfer request must be made within a specified period of time (typically 30-60 days following account opening). If transfer isn’t made within the window of time, the introductory offer will be voided and you will need to pay the regular interest rates.
Balance Transfer Fees - Most cards charge a fee or a small percentage of the total balance. Typically, the fee ranges from 3% - 5%. Do the math to ensure the fees won’t cancel out the amount of interest you will be saving. You can find a few cards without balance transfer fees but they aren’t very common.
Late fees -You may be charged a fee for any late or missed payment, usually around $36. A late payment can void the introductory offer.
Penalty APR – A penalty rate may be applied to your card if you make a late payment or a payment is returned. The penalty APR may apply indefinitely if it is increased.
Overlimit Fees: Charges for exceeding your credit limit. Not all issuers charge this fee.
Types of Debt you can Transfer
Though balance transfers are usually for credit card debt, you can often transfer many different types of debt, including: student loans, mortgages, auto loans and store credit cards. If you have other debt to transfer, ensure the card issuer accepts it.
Minimum payment - In order to keep the introductory APR, you need to make the minimum monthly payment on the card before the due date. If you miss one, the balance may immediately start incurring interest and your credit could go into default. Missing multiple payments can have a negative effect on your credit score.
Payment Due Date - The last day payment can be accepted without penalty. Your due date will be the same date each month and is located on your monthly statement.
It is generally advisable not to make any new purchases with your balance transfer credit card. However, if you need to make a purchase, check to see if there is a 0% APR offer on purchases. Similar to a balance transfer, there are certain actions which can nullify the promotional rate.
Card issuers often offer benefits and perks with the card such as free credit report, airport lounge access, cellphone protection, waived late fees and more. The terms and conditiions will detail the beneofits and how you can take advantage of them.
Other perks are automatic for cardholders, like purchase security, which covers damaged, lost or stolen purchases. But if you're trying to get back money from a lost or stolen purchase, certain types of merchandise might be excluded and there could be a dollar limit.
Most credit card issues arise because cardholders failed to educate themselves on the credit card’s terms and conditions before using the card. Balance transfers have terms and conditions different from the standard credit cars so ignore them at your own peril.