How Balance Transfer Credit Cards Can Save You A Small Fortune
Credit cards (Photo credit: Wikipedia)
Whether you’re an experienced cardholder or a credit novice, odds are at one time or another you’ve payed some interest on your credit card. It happens to the best of us, and one or two interest payments isn’t such a big deal if you keep your balance low.
However, if you realize that month after month you’re paying a credit card bill on a statement that isn’t getting any smaller, then you know that interest fees can be a killer. If that situation sounds familiar, then you should absolutely consider making a credit card transfer to a balance transfer credit card. The longer you wait, the more money you’re shelling out on fees you shouldn’t even be paying.
So, what are balance transfer credit cards and how exactly do they work?
Balance transfers are simple; essentially you’re taking the balance of one credit card with a high interest rate and moving it to another credit card with 0% interest. That way, you can start paying your credit debt directly without interest and finally start seeing that balance shrink.
Think about it – if you’re paying 15% in interest on a $1,000 balance and you’re making $100 payments each month, only $85 of that is going to your balance. Without spending another dime on that balance, it will take you 12 months to pay off that balance and you’ll end up paying $180 in interest. Who wants that?
Before you get a move on you credit card transfers, here are a few things to consider before hitting the “Apply” button on a balance transfer credit card.
-Determine how long it will take you to pay back your debt
Because balance transfer credit card intro periods can last anywhere from three to 18 months, you’ll want to calculate approximately how long it will take you to pay off your debt based on realistic monthly payments. We recommend staying on the conservative side when approximating your payment plan, that way you’re not blindsided if you fall short of your goal.
Once you’ve got your plan in place, it’s time to do your research on intro period lengths and fees.
-Yes – there is almost always a balance transfer fee.
OK, that’s the bad news. The good news? Balance transfer fees are small – usually around 3% of the debt you’re moving over or $5, whichever is greater. Currently, the only credit card on the market today that doesn’t charge a balance transfer fee is the Slate(SM) from Chase – No Balance Transfer Fee Card. (So long as you transfer your balance within 60 days of card activation.)
However, the fee isn’t the most significant thing you should consider before applying for a balance transfer credit card. It’s the intro period that is most important, especially…
-Make sure balance transfers apply to the 0% promotion period
While many – if not most – credit cards offer the balance transfer option, significantly less include credit cards transfers in their promotional period. Before applying for a balance transfer credit card, be sure to confirm that balance transfers AND purchases are included in the intro period. And like we mentioned before, make sure the length of the intro period matches up with your realistic payment plan.
Finally…
-If you can’t pay back the whole balance the first time, try once more
You don’t want to keep rolling your balance over and over to new cards since too many credit cards can start to harm your credit, but two or three balance transfers over an extended period of time isn’t going to hurt your score.
So, if you can’t knock out your debt in one intro period, give it another shot and open up another balance transfer credit card. Only this time we might recommend a more extended intro period since you can only attempt the card transfer strategy so many times before it can have a negative impact on your credit score.
This guest post was written by Jason Bushey. Jason runs the day-to-day operations at Creditnet.
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Category: Credit
