When Balance Transfer Isn’t Such a Good Idea

It is well known that you can save a lot of money by simply transferring your credit card balance from one lender to another, what is less known is that in some cases, you can loose out.

Below are some scenarios whereby you would loose out by transferring your balance.

When you have a small balance left
What is considered a small balance may vary from person to person but if you're capable of paying it off in 3 – 4 months, consider that a small balance.

Almost all lenders will charge you a balance transfer fee of around 2 – 4%. Assuming that your old interest rate was 15%, a 4% balance transfer fee would have covered interest payments of over 3 months. In this case, you would break even in 4 months on a 0% balance transfer deal. Unless there are other benefits, it isn't worth transferring your balance in this scenario.

When the interest free period is too short Before deciding on a balance transfer offer, consider the size of your credit card balance, ideally the offer should last long enough for you to be able to pay off all that you transferred or at least reduce it substantially. The risk in this scenario is that some credit cards will hike your post-offer interest rate so high that it would wipe out any gains you made during the interest free period.

When faced with stringent conditions
Like any other contract, credit cards have conditions though some are more stringent than others; with credit card contracts, sometimes buried deep in the fine print are conditions that might turn what seemed like a great deal into a nightmare. The most common condition is that you must always make your repayments on time, a late payment would trigger the withdrawal of the offer and you would be left with high interest repayments.