Read the fine print before you act!
High interest rates can be a massive drain on your ability to manage your money and finances.
If you are overloaded with loans or credit cards at high rates, it can seem as though practically every cent you earn goes to pay the credit card interest and that the main amount you owe, the principal balance, never seems to shrink.
Under these circumstances you might think it's wise to consolidate your credit card debt and use a lower interest rate card to reduce your annual interest rates to a figure that is more manageable.
At first glance, this may seem prudent to transfer a credit card with a annual percentage rate of 16 percent to another card carrying a lower rate, such as 13 percent. But before you make go ahead with the balance transfer, be sure you investigate the fine print of your agreement with the lower-rate card, as you may find that there are "hidden fees" that could come back to bite you when you actually do consolidate credit card debt.
So what should you be on the look out for?
Some credit card companies charge a "balance transfer fee" that you will have to pay when moving the balance from your higher-rate card to the new credit card. In many cases this fee is a one time flat rate, a one time charge, of $35 or $45.
However, some consumers report that they've been shocked to learn that the balance transfer fee is actually a percentage of the amount transferred, from one percent of the amount transferred to as high as four or five percent. On a $2,000 balance transfer, a five percent transfer fee will set you back $100. And remember that when you consolidate credit card debt, these balance transfer fees are added to the new outstanding balance on the lower-rate card. That means if you don't make a payment that covers the transfer fee immediately, you'll be paying additional interest on top of the fee itself.
In addition, check other "hidden fees" when you consolidate credit card debt onto a lower-rate card.
If you prefer to make your payments via phone, some card companies charge a telephone payment fee. You may be shocked to find that your old card didn't require a phone payment fee, while your new card does require a fee, sometimes as high as $10.00 per transaction.
That means you'll have to change from your preferred telephone payment method to another way to pay your credit card bill to avoid getting stung by such a charge.
Your credit card company should inform you of any (payment based) convenience fees or payment fees that will be required before you actually complete your payment. If they don't, then make sure you ask because it's you that will have to pay these additional charges, keeping your owing balance that mush higher.
While we often refer to these fees as hidden, that's only because these fees may not be the first thing that any consumer thinks of when making a decision to consolidate credit card debt.
You should know that the credit card companies are required to disclose fees to you before you avail yourself of their offers, so carefully consider the details and read the fine print before you act.
More Resources
- Living On A Dime - Financial Independence Through Better Life Choices. Publisher Of E-books About Paying Off Debt, Saving Money, Frugal Cooking And Homemaking.
- Everything You Know Is Wrong! About Being Debt Free That Is!! And It Will Keep You In Debt The Rest Of Your Life!
- CREDIT SECRETS BIBLE™ - If You Can Read And Write at the 5th Grade Level Then YOU Can Discover The Secrets To Raise Your Credit Score up to 249 Points In 90 Days... So You Can Start Being APPROVED For The CAR, HOME, Business Loans, and CREDIT CARDS You Deserve!
