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Five Smart Balance Transfer Tips

Nov. 8, 2010
Credit Cards
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About the Author: Jeffrey Weber is a six year veteran of the credit card industry and President of Credit Card Depot Inc. He is an active blogger and consumer advocate. To learn more about current balance transfer offers, visit his website,

If you carry credit card debt from month to month, there is a good chance you could benefit from a balance transfer. With a balance transfer credit card, you can consolidate your high interest credit card debt onto a single card that offers a 0% introductory rate for 6 months to 1 year or more. During this introductory period, interest stops accumulating and every payment you make brings you a little closer to becoming debt free.

Unfortunately, not every balance transfer offer is created equally. Some credit card companies offer truly phenomenal deals, while others offer options that provide minimal saving opportunities. Here are five tips to help you get the most out of a balance transfer.

1.) Avoid Credit Cards with Multiple 0% Periods:  The best balance transfer offers advertise a single 0% period that is granted to all approved applicants. Other offers are not so straightforward. For example, some Bank of America credit cards advertise a 0% rate on balance transfers for 7 or 10 months. Because the length of your balance transfer is not determined until after you apply, the card that arrives in your mailbox may have a much shorter 0% period than you need.

2.) Don’t Let Balance Transfer Fees Deter You:  Every major credit card company that offers 0% APR balance transfer promotions charges a three to five percent balance transfer fee. On a $3,000 transfer, this fee can range from $90 to $150. While this upfront cost may seem high, it is really insignificant compared to the money you would spend on interest over the course of a year on a card with a 15% interest rate.

3.) Be Realistic When Comparing Offers:  When it comes down to decision time, don’t underestimate the time it will take you to payoff your credit card debt. If you owe $3,000 and can comfortably afford to pay $200 a month, then choose a card with a 0% period that lasts at least 15 months, even if that means paying a slightly higher fee.

Ultimately, you want to buy yourself as much time as possible to repay your credit card without stretching your budget.

4.) Don’t Close Your Old Accounts:  Unless the credit card you transfer your balances from has an annual fee, leave your old account open. Closing credit cards can have a negative impact on your credit score as this shortens your credit history and can increase your credit utilization ratio, making you look maxed out to creditors.

5.) Never Miss a Payment:  A single missed payment is all it takes to lose your 0% interest rate. Most credit card companies won’t budge on this even if you are only a day late, so make paying this bill on time a top priority.

Final Thoughts:  A well-planned balance transfer can help save you a substantial amount of money on interest and sharply reduce the time you need to get out of debt. However, if you choose the wrong balance transfer credit card or make a single late payment, you can squander the opportunity these credit cards provide.