Make the Most of Your Balance Transfer Credit Card

October 9, 2019

By Sherry Keyles

If you have racked up a large balance on a credit card with a high interest rate, you may be wondering how you’ll ever pay it off. One option is a balance transfer credit card with a 0% APR introductory APR.

By moving your credit card debt to a balance transfer credit card, you will save money on interest and pay off the debt faster since your payments will go directly to the principal.

What makes paying off your credit card so difficult in the APR, which can be 17% - 26%, depending on your creditworthiness. With a balance transfer card you don’t need to pay an APR for a specified period of time (currently introductory periods range from 12-21 months).

To determine if a balance transfer is right for your financial situation, you should take inventory of your credit card debt and figure how much you can afford to pay each month to pay the entire balance off. You may find your balance is too large or too small to make a balance transfer worth it.

If you do to apply for a balance transfer credit card, here are some suggestions for maximizing the savings from your 0% introductory APR:

Establish a repayment plan

Once you’ve transferred your balance, create a plan for paying it off. Base your plan on how time you have before the introductory offer expires. Calculate how much you need to pay each month to to pay off the debt within the specified period. Don’t forget to include the balance transfer fee in your calculations. Having a plan will keep you focused on your goal to eliminate debt before the introductory offer expires.

Shop Around

Do not jump at the first balance transfer offer you see. Compare the introductory offers, balance transfer fees and other important features to determine the card fitting your specific situation.

Keep Payments Current on Your Old Card

Continue making payments on your existing credit card until you receive confirmation the balance transferred. If you stop payments before balance is transferred, you will be subject to late fees.

Pay off Balance Before Introductory Period Expires

When the introductory period ends, the standard interest rate (typically, 17-26%) will apply to any remaining balance. Do everything you can to ensure you eliminate your balance before the 0% APR period. Your card issuer will probably not notify you when the introductory offer expires so set several calendar reminders so you can evaluate if you will be able to pay off the balance by the end date.

Make Monthly Payments on Time

Make at least the minimum payment by the due date every month. Most cards will impose late fees and, possibly, penalty APR on late or missed payments. However, with a balance transfer card, late or missed payments may invalidate your introductory offer – even after one missed payment. If you lose the introductory APR, you will be forced to pay a higher interest rate on your balance. To avoid any issues, set up automatic payments to pay your bill each month. Some balance transfer credit cards let you pick your due date to meet your needs.

Be Mindful of Balance Transfer Fees

Although there are a few cards with no balance transfer fees, most balance transfer cards charge a balance transfer fee of 3% or 5% of transferred amount. Before transfering your balance, do the math to ensure the fee won’t interfere with the savings from the 0% introductory APR. Before transfering,

Don’t Forget to Read Fine Print

Each card has their own set of terms and conditions. Before signing up for a balance transfer credit card, make sure your understand the requirements of keeping the introductory offer as well as any fees. You don’t want any surprises once you transfer your balance.

Transfer your balances immediately after account opening

Most balance transfer credit card issuers set a deadline for when you have to transfer your balance to qualify for the introductory offer. Typically, it’s 30 or 60 days after account opening. If you miss the deadline, you will lose the 0% APR. Transfer the balance as soon as possible to avoid any problems. Some cards let you ask for the transfer on the credit card application.

Pay More Each Month to Eliminate Debt Faster

To ensure you are able to pay off your balances before the 0% APR expires, make more than the minimum payment each month.

Don’t Make Purchases with your Balance Transfer Card The idea behind getting a balance transfer credit card is to eliminate your credit card debt. Many cards offer rewards, signup bonuses an cash back to encourage you to spend. Don’t give in to the temptation. Put the card away or cut it up to avoid using it.

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