Balance Transfer Credit Cards: Is It Worth Trying?
Balance transfer credit cards can indeed save money on interest when compared to their original cards, especially at higher balance levels and with lower interest rates. However, the decision to use them effectively depends on several factors:1. Interest Rates and Balance Size:
- Lower interest rates or larger balances typically result in more savings from transferring. For example, a $1,000 balance at 15% vs. a new card with 9% can offer significant savings over time.
2. Fees and Transaction Costs:
- Balance transfer cards often carry higher fees than some original cards. These fees can add up if you need to pay them back or charge if the balance remains unpaid.
3. Usage Pattern:
- If you carry a large balance that persists, transferring may not be cost-effective. However, frequent transfers and clearing balances through payment plans can justify using transfer cards.
4. Gravity Periods and Late Charges:
- Balance transfer cards might have a grace period before interest starts charging. Even if this is beneficial, it may not save money unless the new card offers lower rates.
5. Other Card Options:
- Consider other credit cards with better interest rates or rewards programs to ensure no alternative becomes more attractive.
In summary, balance transfer credit cards can be a good investment for saving on interest when used appropriately. However, the decision should be based on personal financial needs and compare different card types, including other high-interest options.
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