Trying to manage your debt?

You might have received offers to transfer your balance from one credit card to another for a low interest rate. These offers can be a great way to decrease the interest charges that you are paying. However, it is very important that you make sure you understand what you’re signing up for. Ask yourself: how long is that interest rate valid, what is the interest rate on new purchases and under what circumstances does the intro rate change?

Introductory rates typically expire after a period of time, whether 6 months or a year. So a 0% balance transfer rate will be great but after that introductory period the rate will rise, so manage your spending accordingly. Also, in most cases the low rate only applies to balance transfers. Any more money you spend on the card will have a higher interest rate.

Some balance transfer interest rates can also be increased if you pay other account balances late. Be sure you understand your credit card agreement and follow its terms or your rate may change.

Finally, if you’re planning to keep on transferring your balances from one card to the next, make sure you read the fine print. Some balance transfer offers will retroactively charge you a higher rate if you transfer your balance within a year. That means that if you transfer you balance, say, after the six month 0% rate period is over, you could be charged the full interest rate (usually more than 15%) on all the transferred balances.

If you manage your balance transfer correctly, it can really help reduce your debt. The EverydayMoney Credit Card Tool can help you understand balance transfers.