What You Should Know About Balance Transfer Credit Cards

Before I tell you about what to look for when applying for a balance transfer charge card, it is important that you understand exactly what a balance transfer charge card is. Balance transfer charge cards are charge card accounts that allow consumers to use them to pay off other higher interest rate accounts. These accounts came along as a marketing tactic. Due to the overwhelming success this balance transfer offer had, many banks started offering them as a standard credit card account feature. Now there is so much competition in the balance transfer industry, that you can afford to be picky!

Here are some things to look for before filling out the application:

1. Look at and understand how the introductory APR works on the account – Introductory interest rates are used as a promotional tactic by most banks that offer balance transfer credit cards. Introductory interest rates will usually last for a short period of time after the opening of an account. In most cases, these rates will last from 6 to 18 months. On rare occasions, you may come across a 24 month balance transfer offer. Introductory interest rates are usually between 0 and 3.99 percent. Don't let this fool you, even though the savings are nice, remember that the introductory annual percentage rate doesn't last forever and should not be the basis for your decision.

2. Understand all interest rates on the account – The majority of charge card accounts will come with various APRs. Here is a list of rate you should look at

Standard APR – The standard APR for a credit card account account is the APR that the card user will pay for general purchases such as groceries, gas, etc... The balances are charged the standard annual percentage rate only when there has not been any defaults on the account.

Default annual percentage rate – The default APR is the APR that people will pay when they have defaulted on the account in any way. Defaults include late payments, purchases over the predetermined credit limit, missed payments, etc... Default APRs usually range between 23% and 31.9%.

Cash advance APR – The cash advance APR is the APR that is applied to specific cash transactions. Cash transactions include ATM withdraws, asking for cash back from the teller at a store, cash transfers, etc... The cash advance interest rate is normally higher than the purchase interest rate but lower than the default APR.

Promotional or introductory interest rate – This term refers to an interest rate used as a marketing tool. Introductory APRs will last for a short period of time once the consumer has opened the charge card account. Introductory interest rates will be increased the the standard interest rate on the account. Introductory rates should not be the basis for deciding to use or not to use a specific charge card account.

3. Balance transfer fees can be a pain – Before applying for any balance transfer credit cards, it is important to be aware of and agree to the balance transfer transaction fee associated with the charge card. Since nothing in life is free especially when talking about banks, banks have incorporated balance transfer transaction fees that range from 3 to 5 percent of the overall transaction. Before applying for a balance transfer card, do the math and make sure that the numbers work in your favor!

By: Joshua Rodriguez - RJC Affiliates, LLC.

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