Balance Transfer Credit Card Tips
Balance Transfer Fees are Usually a Necessary Evil: Up until the credit crisis, a number of companies offered 0% APR no fee balance transfers. Since then, only a handful of 0% APR no fee balance transfer credit card have been offered by major companies. While limited time no fee balance transfer promotions are occasionally available, most credit cards that offer very long 0% rates on transfers charge standard fees of 3%.
Transfer Your Highest Rate Balances First: Unless the credit limit on your new balance transfer card is large enough to handle all of your outstanding debt, transfer debt from your highest rate cards first. While it may be tempting to wipe out the debt on lower rate cards to reduce the number of bills you have to worry about, transferring debt from cards with the highest rates will save you the most money.
Monitor Credit Card Bills After Your Balance Transfer: Because it can take up to 30 days for a balance transfer to clear, carefully monitor your credit card bills and continue to make payments to avoid penalty fees. This is important even after your transfer has taken place, as you will likely accrue interest charges on your old card from before your balance transfer cleared.
Don't Apply for Balance Transfer Cards with Multiple 0% Periods: If a credit card is advertising a 0% APR for "up to X months" or a 0% APR for X or Y months, avoid these offers. Why? In the fine print, you'll find that you may be approved, but offered a much shorter 0% APR on balance transfers than promised in bold print. Always check the terms and conditions of an application before applying to make sure only one 0% introductory period is offered.
Ideas to Help You Find the Right Balance Transfer Credit Card
Key Factors that Influence Balance Transfer Savings: The amount of money that can be saved with balance transfers varies dramatically from person to person. The most obvious variable is current interest rates; those with higher rates will save more. Balance transfer fees also play a role. However, monthly payments are an often overlooked factor that can have a huge impact on how much a person can save by doing a balance transfer. Full Article.
Balance Transfer Credit Card Market Overview: In this article, you can learn more about trends in the balance transfer market. It examines 0% promotions currently being offered by the nation's largest issuers to help you find a balance transfer card with an appropriate length and fee structure for your particular needs. Full Article.
What to Look for on a Balance Transfer Credit Card Application: Before you virtually sign on the dotted line, it is important to carefully review terms and conditions. In particular, you will want to make sure the longest advertised 0% rate is granted to all approved applicants. Then you will want to check the balance transfer fee, which should be no higher than 3% on any card with a 0% rate lasting less than 15 months. Lastly, you'll want to consider the long term rates, especially if you don't think you can fully repay your balance before the 0% APR ends. Full Article.
How a Balance Transfer Can Benefit You
For obvious reasons, transferring high interest credit card debt to a balance transfer card that charges no interest for a year or more will save you money. What surprises people is just how much they can save. Taking standard balance transfer fees into consideration, a person with a 16% interest rate can expect to save around $100 for every $1,000 they transfer to a card that offers a 0% APR on balance transfers for one year. For a person with $5,000 in credit card debt, the savings will likely exceed $500.
Saving $500 in one year is great. However, the most overlooked benefit of balance transfers is the role a 0% rate can play in getting you out of debt quicker. Here’s a prime example:
A person with $5,000 in debt at an average interest rate of 16% will need to pay $150 every month for three years and nine months to become debt free. In just one year, that person will spend just over $700 in interest. And by the time the debt is repaid in 2015, the total interest bill comes to just over $1,600.
However, if that same person moves the debt to a 0% APR balance transfer credit card, their debt can be reduced by 33% in just one year. Then, even if the interest rate goes back to 16% after the 0% period expires, it will only cost $650 in interest to become debt free, a savings of nearly $1,000. Plus, it is always possible to do another 0% balance transfer after the rate increases. This can further reduce interest expenses and decrease the time it takes to get out debt even more.