Credit Card Balance Transfer Caveats

• Caveat #1: Make sure you know the interest rate that you will pay after the interest-free period has ended. This rate, also called the “go to” rate, may be significantly higher than what you were paying previously, which would leave you with a worse deal than you had before the transfer. So, read the terms carefully, pay attention to the numbers, and if at all possible, pay off your entire balance during the interest-free period.
  
  
• Caveat #2: Read the fine print for any conditions and penalties. Many zero percent balance transfer deals come with a catch: any new purchases made during the interest-free period on the card to which you have transferred your balance(s) will carry a higher interest rate; as much as 29%! Furthermore, any payments you make toward the new card will quite likely be applied to the lower interest, transferred balance(s) first, only increasing your debt burden. Balance transfer options are a great way to save money in the long term, but if you have to make any new purchases during your interest-free period, use cash, a debit card or a prepaid credit card.
  
  
• Caveat #3: Be very careful when using convenience checks! If you receive convenience checks in the mail with your credit card statement, don’t be too quick to use them; they can get you in trouble. With most cards, use of those checks is equal to receiving a cash advance, and credit card cash advances always carry high interest rates. Some credit cards will give you a favorable rate if you use the convenience checks to transfer balances from other credit cards, but read the fine print first. Be sure that you are aware of all the terms and conditions before you use them. The good news, however, is that certain credit card companies include blank checks that you can use with their 0% APR balance transfer offer. These kinds of checks can be used for anything you want, and many smart consumers use them as a way of getting an interest-free loan. You can also use them to open a high-yield savings account, or to purchase a Certificate of Deposit. Just remember: once the once the 0% APR period ends, interest will begin to accrue on your “loan”, so it is best to return any of the funds you use with these convenience checks back to the credit card before or as soon as the 0% APR period ends. Of course, all convenience checks have limits, which are usually equal to the credit limits on their respective accounts. If you are not 100% sure that the convenience checks you receive with your card are in fact 0% balance transfer checks, take five minutes to call your credit card company to find out. As a precaution, write down the name and company identification information of the representative that you speak to, just in case he or she makes a mistake.
  
  
• Caveat #4: Don’t overdo it! Regardless of whether you are approved or rejected, too many applications for credit within a short period of time will hurt your credit rating. Look for balance transfer deals that offer at least 6 months introductory APR on balances transferred to avoid having to transfer balances too often.
  
  
• Caveat #5: Before you submit an application for a credit card balance transfer, make sure that the credit cards involved in the transfer are not actually issued by the same company. If you try to transfer a balance from one credit card to another and both credit cards are owned by the same bank, then your application will probably be rejected. If, for example, you try to transfer a balance from an AT&T Universal Platinum Card to a Hilton Honors® Visa® Card, your balance transfer request will almost certainly be denied because both credit cards are issued by Citibank (Citi®.) You can’t afford to make this kind of mistake because such a credit application still appears in your credit history, and the more times you apply for credit in a brief period, the more poorly it reflects on your credit history, especially when you are rejected.
  
  
• Caveat #6: Make sure the total balance that you are transferring is less than the credit limit on the card to which it is being transferred. For example, if you are planning to transfer a total of $5,000 via a zero percent intro APR offer, the credit limit of the receiving credit card account should have a credit limit of over $5,000. Some 0% APR offers charge a fee for transferring balances, so if you don’t have any credit above and beyond the amount of your balance, you can be charged an over limit fee once the transfer fee is applied. The best way to avoid this, however, is to make it a priority to find offers that don't charge a fee for transferring balances.
  
  
• Caveat #7: There are times when even with a balance transfer fee, a balance transfer deal is just too good to pass up, especially if the balances you need to transfer are high. However, there are two common pitfall that you want to be sure to avoid:
  
  
  • A reasonable balance transfer fee will have a cap, usually between $75 and $99. If the deal has no cap, you may find yourself regretting that you transferred your balance(s) at all.
    
    
  • Read the fine print and be certain that there are no finance charges that apply to the balance transfer fee. Believe it or not, some companies actually apply finance charges to balance transfer fees, so be sure to know all the terms and conditions of your transfer offer. However, there are still lots of consumer-friendly, 0% intro APR balance transfer offers available in the American market, so there is no reason to sign up for one that charges interest on fees.
    
    
• Caveat #8: This may seem self-explanatory, but be sure to pay all of your bills on time -- not just your mortgage and credit card bills: you need to be timely and current with your household and utility bills as well (cable, phone, natural gas, etc.) Banks and credit card companies offer the best 0% deals to customers with the best credit scores, plain and simple. Having a high FICO score (720 or higher) will also minimize the risk of having your credit application rejected. For your credit card accounts, use payment scheduling and automatic online payments, but still receive paper statements as a backup payment option, just in case.

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