Question

Zoe Robinson has several credit cards, on which she is carrying a total current balance of $15,000. Her current cards charge her 12% per year. She is considering transferring this balance to a new card issued by a local bank. The bank advertises that, for a 3 percent fee, she can transfer her balance to a card that charges a 0 percent interest rate on transferred balances for the first 6 months. Calculate the fee that Zoe would pay to transfer the balance.

$   

Describe the benefits and drawbacks of balance transfer cards.

Answer 1

The fee that Zoe need to pay= Transferred amount*percentage fee

=15000*.03 =450$

Benefits:

• Easy transfer of pending balance to a new credit card
• Can reduce the current interest rate of the card to a new lower interest rate by transferring
• Most card comes with interest free introductory period

Disadvantages:

• The amount given as fee will be higher if transferring amount increases
• Still contains all the risk of credit card if timely payments are not done
• Not recommended for good credit rating
• Any violation of the agreement can cause severe penalty