Overview: Before the credit crunch on 2008-2009, doing an online balance transfer was a fast and easy way to consolidate high interest credit card debt onto a single low rate credit card. Today, a number of factors, including the intricacies of credit card terms and conditions, make it worthwhile to wait until after applying to initiate balance transfers.
Now, applying online is still the fastest way to get a new card for balance transfers. However, it is important to wait until your application is approved and your card arrives in the mail to begin the balance transfer process. Here are just a few reasons why you should not transfer balances online.
Reason #1 – Getting Approved: Although most companies advertise balance transfers, many companies are more interested in approving consumers who will use cards for spending. Citi balance transfer credit cards, for example, carry long 0% rates on purchases and balance transfers. However, many other companies offer short balance transfer durations in the hopes of attracting customers who are more interesting in spending, as this increases revenue earned via swipe fees.
Thus, although these companies may advertise balance transfers, they may not be looking for customers who simply want to use their cards for this purpose .Consequently, when you apply online for a credit card and elect to transfer balances online with your application, you may decrease your chances of getting approved or, if approved, get a card with a lower credit limit than you need.
Reason #2 – The Go-To Interest Rate: In the fine print of just about every credit card, you will find that more than one long term interest rate is offered. Some companies even offer multiple 0% periods, based on a review of your credit. In the past, the long term interest rate was much less of an issue than it is today because consumers could hop from one 0% APR balance transfer credit card to the next as soon as 0% periods ended. Such is not the case today and will likely not be for the next few years. Thus, when doing a balance transfer today, it is important to consider the long term interest rate as well as the 0% rate period.
Unfortunately, most credit cards do not reveal your long term rate until after your application has been reviewed. Thus, you may get approved for a 0% APR balance transfer, but end up with a relatively high long term APR. Consequently, the best course of action is to wait until your card arrives in the mail so you can base your balance transfer decision on both the long and short term interest rates.
Reason #3 – The Length of the 0% APR Period: While some credit card companies deliver on the full advertised 0% period, other companies, such as Chase, advertise 0% rates for up to 1 year, but may only grant approved applicants a 0% rate for as little as 6 months. These tiered 0% periods are clearly stated in the fine print, but nevertheless pose a problem for unsuspecting consumers who transfer balances online expecting to get a 0% rate for a full year. This is particularly problematic for those who end up paying a credit card balance transfer fee and only get a fraction of the 0% period they paid for. (At Smart Balance Transfers, we note which credit cards offer tiered rates)
Final Thoughts: Applying for a balance transfer credit card online is not as easy as it once was. And, while getting approved for a low rate card with a good introductory offer has become significantly easier of late, a lot of important terms and conditions are not revealed until after consumers apply and are approved for cards. This element of surprise is something that can easily be avoided by waiting until your credit card arrives in the mail before initiating a balance transfer.