| 12 questions to ask about balance transfers |
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7. What's the difference
between a cash advance and a balance transfer? A cash advance
allows you take money for any purpose, while a balance transfer
is limited to moving your balance from one card to another. In some
ways, says Detweiler, the two are similar: "There may be a
fee associated with each, and interest typically starts accruing
immediately -- there's no grace period." But the specifics
for balance transfers and cash advances vary by card. A balance
transfer might have higher fees with a longer low-interest period,
while a cash advance may have lower fees and a shorter low-interest
period. "Be sure to read the fine print," she adds.
8. What's
the best way to transfer a balance? Not
all balance transfers are created equal, says Detweiler. Transferring
the balance directly by phone, using convenience checks or using
a cash advance may have different fees and different rates. "I
recently received an offer that came with four different convenience
checks," she says. "Two had an introductory rate and two
had a fixed-for-life rate." A Michigan reader recently reported
he got a balance transfer order that boasted zero percent until
paid off and no transfer fee. The mailing included several convenience
checks, but he later learned using the convenience checks -- even
for a balance transfer -- meant the zero-percent rate would be good
for only six months instead of until paid off.
9. How
are convenience checks treated? No matter what you use your
convenience checks for -- whether you write one out to yourself,
to a merchant to make a purchase, or to a credit card as a way of
transferring a balance -- it will likely be treated as a cash advance.
Sometimes, cards will provide special rates for these checks, but
only if you use them to transfer a balance. "If you get a balance
transfer check for zero-percent APR for six months and the fine
print says it can only be used to transfer balances, if you write
the check to yourself or used it for a purchase, you might actually
be charged a different interest rate," says Detweiler.
10. What
about new purchases? Unlike cash advances
and balance transfers, purchases charged to the card will typically
have a grace period before interest starts accruing.
11. Do you
qualify for the lowest rate? If you're
someone who has credit card debt, you may not be a preferred customer,
which means you won't get the best rates, so be sure to double-check
everything when you get your card. "Most issuers leave themselves
the ability to secondarily screen your credit-even on a pre-approved
credit card," says Detweiler. They may offer you a different
rate if you don't qualify." Fortunately, you can cancel the
card without penalty if you discover that you didn't get what you
bargained for.
12.How is
your information protected? This is a
key question for anyone to ask when they apply for a card, but for
those already in debt, it's particularly important. With hackers
finding new ways to access personal account information, you want
to make sure your credit card company will protect you so you don't
have to deal with the hassle of identity theft on top of everything
else. "When you ask that question, the answer shouldn't just
be that they have seven encrypted firewalls," says Williams.
"They should be able to tell you that they have a policy that
you'll be notified quickly by both e-mail and snail mail."
Figuring out the best deal for
you will require that you sit down and take some time to do the
math. Understand what triggers higher rates, and don't forget to
save all the paperwork -- and watch your mailbox for any change
of terms in your account. "If you're faint of heart it's better
to find a card an interest rate that fits your budget and stay there,"
says Williams. "Then pay down your debt."
Find out how long it will take
you to pay off your debt -- and how to do it most efficiently --
using our debt
pay-down calculator.
Erin Peterson is a freelance writer
based in Minnesota.
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