Balance Transfer Pitfalls That You Might Fall Into Part II

In the first installment of this series, we gave you two things you need to consider when taking advantage of low-interest and no-interest balance transfers on credit cards. There are more things to be wary of - read on.

Applying The Low Interest Rates Only On New Purchases

Not all balance transfer credit cards are the same.  While most will apply the lowered rates only on balance transfers, quite a few will go the opposite way.  They will keep the usual interest rates on the transferred amount but offer very attractive rates on new purchases for a specific length of time (typically 6 or 9 months).  If you don’t realize this before signing up for the card, you’ll end up paying full interest plus the accompanying transfer charges - something that can leave you losing money in the end.

Watch Out For Hefty Fees

Most cards typically charge a 4% rate on all balance transfers, with some setting a maximum cap at $25 or $50.  Make sure to check whether the credit card company is capping their balance transfer fees or not before deciding to take advantage of such an offer.

If you have a considerable amount of debt, you could be paying high premium for it.  Transferring a $4000 debt, for instance, will get you close to $200 in fees.  Even worse, a few of these cards will tack the charges as part of your new balance.  If possible, only do balance transfers on cards which put a cap on their fees.