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Money Management

Should You Consider a Credit Card Balance Transfer?

A balance transfer can be an excellent way to get credit card debt under control. However, while balance transfer offers may seem like gifts from credit card companies, not all are in your best interest. Before you do a balance transfer, be aware that you'll most likely be charged a balance transfer fee. If the interest rate on the new card is only slightly lower, the savings may be negligible. Always read the fine print so your balance transfer doesn't end up costing you more than if you had left well enough alone.  

What Is a Balance Transfer? 
A balance transfer is a transfer of outstanding debt from one or more financial institutions to the institution making the offer. Often card issuers offer consumers a much lower rate for a limited period of time for any balance transfers made from competitors' cards onto their new credit card. This rate varies from one financial institution to another, but can even be as low as 0% for a limited time. Often these offers include a balance transfer fee up to 5% of the balance transfer amount per transaction. 

Does the Balance Transfer Come to the Rescue? 
Maybe. A balance transfer can be an extremely effective way to reduce your outstanding debt, while also saving money on interest costs. This debt could include credit cards and, if the credit card limit allows, even personal and auto loans. However, you need to remember that this promotional interest rate is usually valid for a limited time. It's important to understand what happens after the promotion timeframe has expired. If you choose a credit card that reverts to a high rate before you pay off the transfer, you could end up paying more in the end. To avoid a rate hike increase, consider using a credit card with an everyday low rate to transfer your debt.  

Cut Up High Rate Credit Cards 
Once you transfer a high rate balance, stop using the card. It's easy to be tempted to start using a zero-balance credit card. Before you know it, you could have two credit card balances to pay off. (Note: You may want to consider keeping the account open even if you don't use the card. If you have a long history with the credit card issuer, it could help your credit score.)  

If you currently have a credit card with a high interest rate, consider a balance transfer to everyday low rate credit card, like Orange County's Credit Union's Platinum MasterCard® Rewards Credit Card. Rates are as low as 9.74% APR and you'll be automatically enrolled in a free rewards program.  Rates and terms are subject to change.

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