Consolidating Credit Card Debt
On the surface, it might appear prudent to move forward with consolidating credit card debt. Especially when comparing an annual percentage rate of 16 percent to another card carrying a lower rate, such as 13 percent. Prior to you making the balance transfer, be sure you examine the seemingly invisible fine print of your agreement. Concealed costs that might come back to bite you with the lower rate card.
When consolidating credit card debt this is what you need to look for
Some credit card companies charge a “balance transfer cost” that you will have to pay when moving your balance. Oftentimes this charge is a flat rate, one time charge of thirty five or forty five dollars. The balance transfer fee is in fact a portion of the amount moved which may surprise consumers.
On a two thousand dollar balance transfer, a five percent transfer cost will set you back a hundred dollars. When combining credit card debt, these balance transfer charges are added to the new card balance. If you do not make a payment that covers the transfer fee, you’ll pay interest on that as well.
In addition, inspect other “hidden” costs when you combine credit card debt onto a lower-rate card. You might find your old card didn’t require a setup fee, while your new card will charge you this fee. That fee can be as high as ten dollars per deal. The new card service needs to notify you of charges that will be added prior to finishing the transfer.
These costs are referred to as hidden because the consumer is not aware of them at the time of transfer. Understand that charge card companies are required to divulge charges prior to you taking advantage of their offers. You need to thoroughly research the information and small print prior to you acting on the transfer. Also, be aware of the basic account fees for any credit card service that you choose.
Watch For Hidden Fee’s From Merchant Services As Well
Basic Account Fees
Every card offer has basic fees that are inclusive of charges that apply to all card holders. It is not dependent on their spending habits. In the first twelve months that an account is open, the basic account fees (i.e. non-penalty, non-usage fees) can’t go over twenty five percent of a particular account’s credit line.
Basic fees can include:
Application/Processing Fee: This is a fee you are charged to cover the cost of reviewing your application for acceptance. This fee is rarely charged any longer and usually individuals with solid credit have this fee waived, as a result of market competition. Unfortunately, some card issuers specifically go after people with subpar credit and charge this fee which is estimated before the account is opened in order to avoid card act regulations which cap the first year administrative fees. They do this to profit from the amount of volume in the subpar credit space.
Program Fee or an account setup charge: this is another way for charge card companies to add on an additional ridiculous fee. This is a onetime fee charged once an individual has been approved for a credit card.
Yearly & Monthly Fees: membership type fees are charged to account so that account maintenance, customer service, and rewards programs, can be paid for and continued.
Bottom line for credit card holders, make sure you take the time to understand all applied charges that you will be charged to you when consolidating credit card debt and also your reoccurring fee’s that will continue on afterwards. Ask the credit card company you will be going with good questions to uncover all potential fees coming your way so you can make an educated decision.