5 Criteria to Consider When Shopping Around for a Balance Transfer Credit Card

If you're thinking about consolidating your outstanding credit card debt by transferring your high rate balances to a low rate credit card, make sure you take into account the following criteria in your selection process:

1. Promotional Rate: Whether it's 0%, 1.99%, the rate is only one of many factors to consider when choosing a balance transfer credit card.
   
2. Promotional Period: On the short end, it can be 6 months and on the long end as much as 21 months or more. Make sure you know when the promotional period expires down to the exact day. If a promotional offer says "Through April 2012" it means that the promotional rate is valid until the close of your billing cycle in the month of April 2012. Make sure you know when your billing cycles begin and end each month.
3. Balance Transfer Fee: Even if a card is offering you a 0% promotional rate, it will cost you money to transfer your high rate balance. On average the balance transfer fee is 3%-4% though there are cards with lower and higher rates. Make sure you know the answer to this question (it should be in the promotional literature but you can call the credit card company to ask directly). If you're looking to transfer $10,000 to a card which charges a 3% transfer fee, then you will be charged $300 just for making the transfer.
4. Annual Fee: Some cards charge an annual fee and some don't. Just make sure you know which group the credit card you happen to have your eye on fits into. If they do charge an annual fee, make sure you know the amount of the annual fee.
5. What happens after the promotional period expires? Your rate is going to change from a promotional rate to a standard rate. Make sure you know the standard rate. Also, make sure you know whether that rate is a fixed or variable rate. Usually in the case of a variable rate, the literature will provide specific information as to how the rate is calculated (prime rate plus some percentage). If you can't readily find the information, call the credit card company directly and make sure you know the answer.
   

There are numerous resources available on the internet so I encourage you to do your homework to find the option which is best suited to your needs. One resource which I find useful and which I recommend to my clients is Bankrate.com since you can further refine your search based on card type, credit score and issuer.

Some final thoughts about balance transfer credit cards:
1) As you would with any other credit card, make sure you pay your balance transfer credit card bills on time.
2) Be vigilant about your credit card usage as a whole while you're taking advantage of the balance transfer option. You want to pay as much as you can to the lowest rate card so that you can eliminate that debt the fastest. Keep a close eye on things to make sure that you don't drive up your other credit card balances. Once you pay off one credit card, keep up that same disciplined behavior with respect to your other credit cards until you've paid them all off successfully.