Now that the economy is on the upswing and the lending environment is getting better, credit card companies are making a comeback with their balance transfer deals. While balance transfer deals are making a comeback they are not as attractive as they were in the past. It’s really worth doing the math to make sure you’re getting a good deal. Here are the top 5 ways to make sure you’re getting the best deal.
Calculate the APR by including the balance transfer fee
Nowadays, almost all balance transfer cards come with a transfer fee of 2 to 5 percent. In essence, this makes a card advertising 0% APR for a year mean that the APR is between 2 to 5 percent.
The better way to look for these cards is by finding ones with a longer promo period like 18 months to two years. If your credit score is excellent, don’t accept anything less than a one year 0% APR promo period.
Look out for the “up to” offers
This means be wary any balance transfer offers that promise 0% APR “up to” anything. When you see an offer like this, it means that only the consumers that have superstar credit can expect to receive all of the advertised benefits.
If you are not located in the top tier you’ll end up getting a shorter promo period as well as a higher APR after the promo period expires. A better way is to only apply to these offers that have upfront and predictable terms.
Make sure you know what the long term card APR is
If your plan is to pay off your balance transfer inside of the promo period than you have no need to worry about the higher interest rate that follows the introductory 0% APR.
When you are searching for the best balance transfer card you’ll need to estimate how long it will take to pay off the initial balance transfer with payments you can make and afford.
You will also want to calculate the amount of interest that will accrue on your balance after the promo period expires. Only then will you really get a true 0% APR balance transfer deal.
Is there 0% APR on purchases as well?
This is a great added benefit, especially if you find a 0% balance transfer card with no fees and a long term intro period. On most cards the 0% purchase APR will expire well before the 0% balance transfer rate. This means that if you make a lot of purchases on your card and the purchase promo period expires, you will have a lot more to pay.
Look for a balance transfer card that offers a 0%APR on both purchases and balance transfers where the promo period ends at the same time.
Monitor the effect on your credit score
When your credit debts tie up a significant percentage of your available credit, this will affect your credit to debt ratio and that is nearly 35% of your overall credit score. You’ll want to keep your debt to credit ratio around 10 to 15% and always well below 35%.