11 Balance Transfer Mistakes You Must Avoid

April 5, 2019

By Sherry Keyles

Balance transfer credit cards are a great way to paying off your credit card debt faster while avoiding high-interest payments. However, if you aren’t careful, you may derail your goal to save money while eliminating your debt. To ensure reduce your debt instead of adding to it, here are some common balance transfer mistakes you should avoid.

1. Fail to pay off debt before 0% APR introductory period ends

With many no-interest offers ranging from 15-21 months, you can save thousands of dollars in interest by paying down your balances before the introductory period ends. If you can’t pay off the debt in the specified timeframe, you will have to pay a high interest rate (could be as high as 25%) on the remaining balance. Figure out how much you need to pay each month to eliminate the balance by the end of the introductory period. Otherwise, think about a personal loan instead of a balance transfer.

2. Use your card for new purchases

You should only use the balance transfer card for paying off your debt, not for new purchases. Even if the card offers a promotional 0% APR on purchases, you will be adding to the debt you are trying to eliminate. If there isn’t an introductory offer, a grace period on interest will not apply since your card has a balance from the transfer. Interest will start accruing on any purchases immediately. The best option is to put your balance transfer card away and find a card with a lower interest rate for purchases.

3. Make payments late

Most balance transfer credit cards penalize cardholders for late payments.  If your payment is late, the introductory offer will be cancelled and purchase APR will be applied to the remaining balance. In addition, the issuer may charge a late fee and a penalty rate of 30% if the payment is over 60 days late. To avoid missing payments, you should set up automatic payments.

4. Not reading the credit card terms

Before transferring your balance, review the card’s fine print. Most balance transfer cards have a variety of terms and conditions. The terms and conditions also outline any additional fees such as an annual fee or foreign transaction fee. Make sure you understand the consequences of not meeting the terms and conditions. Otherwise, you may negate the benefits you were hoping to get from the balance transfer.

5. Overlook balance transfer fee

Almost all balance transfer cards charge a balance transfer fee of 3% or 5% of the transferred balance. The balance transfer fee may outweigh the benefits of the 0% APR introductory offer. Make sure you consider the balance transfer fee when determining if the balance transfer is right for you. If your balance is small enough to pay off within a few months, a balance transfer is probably not a good idea.

6. Forget to consider the credit limit

Credit card issuers impose credit limits on balance transfers. Depending your debt amount, the credit limit balance transfer limits will prevent you from transferring all of your debt, even if you are approved. Check the limit before making the balance transfer. You can still transfer some of the high-interest debt but it’s not ideal if you were trying to avoid interest

7. Stop payments on your old card prematurely

Balance transfers take time to fully complete. In the meantime, don’t stop making payments on your old credit card until the balance transfer is confirmed by the issuer. Your previous card may impose a late fee, which will eventually transfer over to your new card. The late fee will also impact your credit score.

8. Delay the balance transfer

Once the balance transfer card is approved, your balance must be moved to your new credit card account within a certain period of time (generally 30 or 60 days after balance transfer is approved). The longer you wait to make the transfer, the less time you have to pay off your debt under the 0% introductory rate. Transfer the balance as soon as possible to maximize the introductory 0% offer and reduce the time your balance is accruing interest on your old card. Transferring your balance early will also ensure you don’t forget to make the transfer by the deadline.

9. Attempt to transfer balance from wrong card

Most credit cards do not allow you to transfer balances to cards from the same issuer. If you have a Chase credit card, you can’t transfer your balance to a Chase balance transfer credit card. Keep in mind, many of the big credit card providers offer cards under different names so it may not be obvious the cards are issued by the same bank.

10. Assume you’ll get approved

Most balance transfer cards require good to excellent credit. If you credit score doesn’t meet the standards, you might not get approved for the 0% APR promotional offer or for the amount you need. Review balance transfer offer to find the best deal for your credit score. If you have low credit, you will likely not get approved.

11. Close your old credit card account Avoid closing your old credit card account. In calculating your credit score, credit reporting agencies consider your credit utilization, which is the amount of credit used compared to the amount of credit you have available. When you close a card, your credit utilization ratio goes up, which can lower your credit score. It’s best to keep your old credit card account open but don’t use it for new purchases.

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