Credit Card Balance Transfer Tips
Opening a new account with a promotional balance transfer offer is an excellent way to save money on interest while paying off a balance. But although these transfers can seem like relatively straightforward transactions, there are some nuances that cardholders should consider.
First, be aware that it is not possible to transfer a balance to and from any card. Transfers can occur with payment networks, but they are not permitted within banks. For example, someone could transfer a balance from a Chase Visa card to a Citi Visa card, even though both cards are linked to the same payment processor, Visa. On the other hand, cardholders cannot open up a new Capital One account and transfer a balance from one of their existing Capital One cards.
Another important tip is to wait until the card is received in the mail before initiating a 0% balance transfer. This way, cardholders will know exactly how much of a credit limit they have received on their new account. If the new account’s credit limit is lower than the total of their outstanding balances, cardholders should be careful to transfer the balances from the cards with the highest interest rates first, followed by those with lower rates.
It is also important to continue to monitor the statements from the old cards that balances were transferred from. Cardholders need to ensure that the entire amount has been transferred and that there is no remaining balance afterwards. It is always possible that some interest has accrued between the time the transfer amount was specified and the time when the transfer took place. The result can be a small residual balance that if not paid off, can result in further late fees, interest payments, and damage to the cardholder’s credit.
Finally, cardholders should be careful to select a balance transfer offer that can completely satisfy their needs. While many promotional financing offers only apply to balance transfers, others can include new purchases as well. Having a 0% promotional rate on purchases can be advantageous in the short term, but it can backfire in the long run if all purchases are not paid in full before the promotional period expires. If the cardholder plans on continuing to carry a balance after the promotional term expires, he or she should at least ensure that the card used does not have a high standard APR.
By understanding the terms and conditions of each balance transfer offer, and by carefully monitoring the transaction, cardholders can gain the greatest advantage from these deals while avoiding costly mistakes.