The pros and cons of balance transfers

Ignoring shiny things can be tough. So when a shiny envelope arrives promising 0 percent interest on balance transfers for 12 to 18 months, and your credit card payments are chipping away less at the principle and more at the ever-growing interest, it can be hard to just toss that opportunity in the shredder. Surely, you think, if it wasn't getting bigger every month, you could get that balance paid off before the interest rate resumes.
But balance transfers have their pros and cons. And as with anything, pulling out your magnifying glass and taking a closer look at the fine print can save you the trouble of jumping at what sounds like a good deal and finding your finances far from the solid footing you'd like them to be on.

Some of the details you need to check out include the following:
• What is the length of the introductory rate? These vary between 12 and 18 months.
• After that expires, what will the annual percentage rate be?
• Will you have to pay an annual fee? Late fees? Over limit fees?
• And will there be a fee to transfer your balance? These fees usually range between 3 percent and 5 percent of what you transfer.
• Does the balance transfer apply only to an initial balance brought over-the one listed when you completed the form to accept the card-or can you transfer balances later?
• How will the transfer affect your debt-to-credit ratio? That ratio is your debt divided by your credit limit on the card, and your credit score is improved by having a debt-to-credit ratio of less than 50 percent, or by carrying a debt that is less than half your credit limit.

Before you do anything, do the math. Let's say you have $3,000 in debt, and your interest rate is 10 percent. Twelve months with 0 percent APR could save you more than $300. Figure in a 5 percent balance transfer fee and your savings have gone down to $150.
If you do decide to transfer your balance, it's easy to do so online. And if you can resist the temptation of swiping the card you've transferred from and just leave it in your wallet, or safely encased in ice in your freezer, your good credit history of paying on that account will still appear in your credit report, positively affecting your score.

-Elizabeth Miller