by Joseph Kenny | 06/28/09

Transferring your credit card balance can be a smart financial move. Sometimes you find yourself with a balance that is nearing your credit limit or with an interest rate that is making life difficult. These are times when you might want to consider transferring your balance. You may be able to improve your situation in one swift, decisive move. Just know how to do it correctly.

Know How Long You Have And What You Have

When you transfer from one credit card to another, you usually do it for a reason. To entice you into a new credit card, many companies will offer you an introductory period where the balance that you transfer will have a low or zero interest rate. For anyone getting hammered with high interest rates on their current card, this grace period sounds like a dream come true.

The trick is to know for how long you will enjoy this reduced interest rate and make it work to your advantage. Ideally, you want to pay off your initial balance during this grace period. Otherwise, when the interest rate jumps back up to around 15 percent you may be back in dire financial straits.

You need to know what this low interest rate covers. It may only apply to your transferred balance. This can work well as long as you know that any other charges that you make on this card may be subjected to a higher interest rate.

In some rare cases this low rate may only apply to new charges. This is a problem because the entirety of your debt will be subjected to a higher interest rate when you transfer it, and your situation may not improve at all. Know the exact details of low or zero interest deals.

Ask About Fees

Many cards charge fees when you transfer a balance. This could be any amount but is usually about 4 percent or so. While once most credit card companies put a cap on this expense so that you would only pay $50 or so now this cap is being removed by many of these companies. This means that you may end up paying a fee equal to 4 percent of your total transfer balance.

Depending on your total transfer balance, this could turn into a very large fee. If you know about these fees then this is no problem. You can just ask your questions and make the appropriate choice. It is when you do not ask that you could land in a troublesome situation.

Know What The Terms Are

Did you know that you could apply for a zero interest rate card, get a card, and find out later that its interest rate is not zero? This is what can happen to some individuals with low credit scores. You may not even realize that this switch has taken place until you receive your first statement. The moral of this story is to study the terms of your card before you transfer any balance or make any purchases.

When you transfer your credit card balance from one card to another you need to be careful. You need to know the right questions to ask and you need to know what the answers mean. You do not want to think that you are sailing into clear skies when really you just signed up for one big storm.