Balance Transfer Offers Come With New Catch
If you have ever considered transferring balances to another
credit card, you likely have noticed that there are a lot of
special offers to choose from. These offers tend to have much
better interest rates, and some are even "permanent" rates for
the life of the balance.There are two reasons that you should
be careful about any new balance transfer offer. Otherwise, you
could quickly end up in worse financial shape!
Balance Transfer Fees
You may be aware that balance transfer fees likely apply.
This is not a new concept. The amount of the fees has gone up
substantially however. In addition, fee caps have been increased
or removed altogether.
Many credit card issuers charge 3 or 4 percent of the
transferred balance as a fee. On a balance transfer of $10,000,
this could mean $300 to $400 as an upfront fee.
What you may not realize is that not only does this fee
become part of your balance, but that it may also be added into
the minimum payment for the next month. You may expect to make a
minimum payment of $200, and instead have to pay $600. If you
cannot pay this amount, then you automatically lose the
promotional rate.
A late payment will cause your rate to increase to the
default rate, which can be 24 to 35 percent. This will further
cause your minimum payment to increase.
A balance transfer can save you money in the long term by
reducing your finance charges. However, you can only benefit if
you make all minimum payments on time and take advantage by
paying more than the minimum payment due.
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