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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.

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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.

Bankrate.com's corrections policy -- Posted: May 9, 2005
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