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The Hidden Costs of Balance Transfers | Credit Union | Needham 11/15/2017

For many, balance transfers are an enticing way to manage high credit card debt. The promise of interest-free introductory offers and cash back rewards are often enough to tempt borrowers to grab the first deal they see. However, not every offer is as amazing as it seems. Before you decide to take the plunge, beware of three common pitfalls that could derail your balance transfer:

1. Misleading Introductory Offers

It’s hard to argue with a low or no-interest balance transfer offer, but don’t forget to read the fine print. Some credit cards increase their rates when you use them for a purchase beyond the original transferal. Others default to shockingly high interest rates (sometimes greater than 25%) the moment the introductory period ends. Be sure to review offer details and reach out to the lender with any questions.

2. Deferred Interest

It’s common for credit card companies to minimize or eliminate interest on balance transfers during an introductory period. However, some lenders charge retroactive interest should you fail to pay off the entire balance before the introductory period ends. Life can get in the way, despite your very best intentions, and when it does, a bigger credit card bill will only add to the burden. Avoid promotions that penalize you with accrued interest charges if you fail to pay in full before the introductory rate expires.

3. Hidden Fees

Balance transfer fees can range from 3-5%. That means that if you transfer a $12,000 balance, you may pay as much as $600 just for the privilege of switching cards. Annual fees and other charges can also add up. Always do the math to make sure that the offer still makes sense for you once you calculate the real costs.   

Still not sure if a credit card balance-transfer offer is right for you? Talk to Brett Levine, Member Relations Specialist, today and he'll help you figure out what's best for you.