7 Things to Consider Before Applying for a Balance Transfer Credit Card

There are many things to consider when applying for a new balance transfer credit card. Below are the 7 most important things to look out for.

1. What is the interest rate after the intro period? In nearly all case you will not know the exact interest rate. You can however compare one credit card offer to another based on the rate index plus spread based on today's rates. In most instances a credit card with a long intro period such as 12-15 months will have an extremely high rate after this period is over. If you're sure you will be able to payoff the balance before this period expires this is definitely the way to go. If however you will not be able to pay the balance considerably then the true rate on the card is very important to consider.

2. What is the balance transfer fee? Nearly all credit card companies have a one time fee to transfer a balance. These fees may range for $50 - $100 all the way up to 1-3% of the total balances you are transferring. 1-3% may not sound like a big number but if you are transferring several thousand or even tens of thousands this can add up to several hundred dollars.

3. What is the interest rate on new purchases?

After your balance transfer is complete any new purchases have a different interest rate. It's important to know this rate. It's also important to realize any new charges go behind the balance transfer in order of payoff. This means any payment you make will go toward your balance transfer instead of your recent purchases.

4. Are there any special requirement to keep the promo rate?

Some credit card companies require that you make one purchase per month. Nearly all credit card companies will take away the promo rate if you are ever late on your monthly payment.

5. How long does the intro period last?

Intro periods are generally 6-12 months. In some rare circumstances a credit card company may offer you a low rate that's fixed for life of the balance. ie. A low fixed rate credit card. This is generally the best option if the rate is well below your current interest rates.

6. Do you qualify for the special offer?

All 0% balance transfer offer require good credit to be approved. Even if the offer sounds very attractive often a very small percentage of people will qualify. Some banks will use this as a bait and switch or sorts. Since if you are declined for the promo rate they will offer you a higher alternative rate.

7. How is the average balance calculated?

Some banks use a two month moving average this is harmful to customers. Try to find a card that uses the average daily balance. This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. On the other hand, in two-cycle billing, the interest for the current billing cycle is computed using the daily average balance over the last two billing periods, the current period and the previous period. If you carry a balance this usually means you will lose the grace period on your new purchases.