Your Credit Card's Balance Transfer Option

May 7th 2016

Low-rate credit card balance transfers seem like a great deal, but the fine print on some cards can end up costing you more. Here’s how to make sure you keep more in your pocket:

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Credit cards are a lucrative business, and the banks that offer them use targeted marketing to send you offers that are perfectly tailored to your financial situation. If you carry credit card balances, you can expect an endless selection of tempting applications that promise low introductory balance transfer rates and low or no-balance transfer fees.

These can be awfully appealing, but in many cases, credit card customers do not receive the big savings they expected. Here is the information you need to wade through the pile of credit card balance transfer options and find the few that will deliver on their promises.

Comparing Credit Card Balance Transfer Options

When it comes to carefully comparing offers to find the lowest credit card balance transfer option, reputable websites, such as CompareCards, are helpful. They break down critical information, such as balance transfer rates, balance transfer fees, annual fees and the interest rates after the introductory period ends, in a logical and easy-to-compare format. When selecting a site for credit card comparisons, a quick Better Business Bureau search can confirm that you are working with a trustworthy company.

What to Expect with an Excellent or Good Credit Score

If you have excellent credit, seek out a card that will charge 0% interest for 12 to 18 months. You should have several options that have no annual fee, though you may have trouble avoiding a balance transfer fee altogether. At most, the balance transfer fee should not exceed 3%. Examine the rewards programs, though ultimately, these should be used as tie-breakers, not primary determining factors.

If you plan to pay the balance (or transfer again) after the introductory period ends, the standard interest rate doesn’t matter. However, if you expect to continue carrying a balance when the rate goes up, carefully review the terms and conditions of that rate. The current fashion in the credit card industry is to advertise a range of rates, typically from 10.99% to 22.99%, and your specific rate is selected during the review of your application.

Understanding Your Interest Rate

This sort of interest rate calculation is where you will frequently lose your shirt. If you don’t pay off your balance by the time the introductory period ends, you could be slammed with a massive monthly finance charge. Remember, a $10,000 balance at 22.99% costs you more than $200 a month. BankRate.com and ConsumerCredit.com offer excellent calculators to help you understand how interest rates impact your bottom line.

What to Expect with an Average Credit Score

If your credit score is more toward “average,” there are still companies willing to offer you promotional rates on balance transfers. Sites such as NerdWallet give you the option of narrowing your selections to cards aimed at middle-of-the-road credit reports. While you should still examine available credit card balance transfer options based on the same criteria, you should expect slightly less favorable choices. For example, you are most likely to qualify for cards that offer 0% for only 12 months, and your interest rate after that 12 months will be at the higher end of the range.

Should You Keep Your Current Card?

After reviewing the offers and calculating your balances and interest with one of the online tools available, you may find that keeping your current credit card and paying down or paying off the balance is actually the most financially sensible option. This is typically the case when you have a low fixed interest rate for the life of the card (under 10%), and you are considering transferring to a card with a short introductory period and/or balance transfer fees.

Credit Card Balance Transfer Cheat Sheet

Check out credit card comparison sites to see what offers are available. Compare these factors:

  • Balance transfer introductory rate
  • Balance transfer fee
  • Annual fee
  • Ongoing interest rate

Calculate the interest you will pay in the amount of time you plan to pay off the balance for each card. Make your choice based on the bottom line total of all factors.

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