7 Tips for Using a Balance Transfer Credit Card

October 12, 2019

By Sherry Keyles

If you’ve finally had enough of paying high interest on your credit card debt, a balance transfer credit card can help you dig yourself out.

Credit card debt is the most expensive debt due to very high interest rates (currently 17%- 26%). With a balance transfer credit card, you move your balance from the high-interest card to a new credit card with a 0% introductory APR promotional offer.

Benefits of a Balance Transfer Credit Card

  • Introductory APR. With the promotional APR offer, you typically have 12-18 months to pay off your debt without paying interest, enabling you to eliminate your debt faster. However, you only benefit if you pay the balance off before the 0% APR offer expires. Once the introductory period is over, the standard interest rate will apply on any remaining balance. With rates as high as 26%, you can easily cancel out any savings you gained.
  • Improve your Credit Score. One of the major factors in your credit score is credit utilization, the percentage of your available credit you are using at a given time. You should keep your credit utilization rate below 30%. It’s recommended you keep your utilization rate below 30% That's the percentage of your available credit limits you're using at any given time. Most experts recommend keeping this percentage below 30%. A balance transfer can improve your credit utilization quicker than if you were paying interest on your debt.
  • Consolidate Your Debt. If you have balances on multiple credit cards, a balance transfer credit card can help you consolidate your debt to one card. You then only need to make one payment, streamlining your finances. Some balance transfer credit cards allow you to transfer other debt such as auto, personal or home loans.

Tips for Using a Balance Transfer Credit Card

Here are some tips to help you get the most value from your balance transfer credit card:

  1. Note the 0% introductory APR expiration date. Credit card issuers are under no obligation to inform you when the introductory offer will expire. Mark the date in your calendar.
  2. Include balance transfer fees in your calculations. When you are doing the math to figure out if a balance transfer credit card is right for you, make sure to account for balance transfer fees. Most credit card issuers charge a 3%-5% fee on the transferred amount. Depending on the size of your debt, the zero-interest period can offset the fees but if you are transferring large balances from several cards, it can get expensive.
  3. Choose a credit card from an different issuer than your existing card. You can’t transfer a balance from a credit card account with the same issuer. If you currently have a Chase credit card, you will need to apply for a card with another credit card issuer such as Citi.
  4. Make transfer within a certain window. For most balance transfer credit cards, the balance transfer needs to be made within a certain number of days after account opening (typically 60 days). If you don’t make the transfer within the specified timeframe, you will lose the introductory APR and have to pay the regular interest rate on your balance. Check the card’s terms and conditions for the required window and ensure you transfer your balance within the period.
  5. Don't make purchases on the new card. With a balance transfer, your goal is to reduce your debt. Making new purchases will just add to your debt especially if the card doesn’t offer a 0% APR offer on purchases.
  6. Pay on time. Paying late or missing a payment – even just one - could result in the cancelling of the 0% APR offer. The regular interest rate will then apply to your remaining balance. Set up automatic payments if you aren’t good about paying bills on time.
  7. Don’t stop making payments on your old card. Balance transfers don’t happen immediately, they generally take two to three weeks to complete. Until you receive confirmation the transfer occurred, keep making payments for your old credit card. If you stop payments, you will likely be charged a late fee and, possibly, a penalty APR. 

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