9 things to consider before you act
Tips on Credit Card Balance Transfers
by Bill Hardekopf
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Many credit card consumers are once again being flooded with attractive offers to transfer their existing balance to another issuer. Several issuers are now offering 0% interest rates for over a year on balance transfers and purchases. Most of these offers are going to cardholders with good or excellent credit scores since they represent less risk of defaulting.
If you have good credit and your credit card APR is currently above 15%, this may be a good time to consider transferring your balance to a card with a lower rate. Transferring your balance to a card with a 0% introductory rate can save a consumer a significant amount of money. If you currently have a balance of $5,000 and an APR of 15%, a 0% rate for a year will save $750 in interest payments.
But there are several tips for consumers when considering a balance transfer:
- Balance transfers are not free. They come with a balance transfer fee, usually 3% or 4% of the total amount you transfer. Before you apply for a balance transfer card, do the math to see if the amount of interest payments you save with the introductory offer is more than the balance transfer fee that has to be paid immediately.
- If you feel you will be unable to pay off the entire balance during the introductory period, pay attention to the interest rate that you will pay after the introductory rate expires. In this case, a low APR for the long-term could be more important than the length of the introductory period.
- If you currently have a low credit score, you may not receive the introductory offer that is advertised. The ongoing APR you receive may be higher or your introductory period may be shorter. Or you may not be able to transfer your total balance.
- If you do transfer your balance, you must pay your credit card bill on time every month. If you have a late payment, your introductory period will likely end and you will be assessed the ongoing APR on the transferred balance.
- The introductory rate may only be applicable for the amount you transferred. Unless the introductory offer specifically includes new purchases, any purchase made with the new card will be at the ongoing interest rate.
- If the offer you receive does not meet your needs, decline the card. Limit the number of applications because multiple credit applications are a red flag on your credit report and can lower your credit score.
- There is no grace period with balance transfers. Interest charges begin at the time the check is issued to your new credit card issuer.
- The new issuer pays the amount of the balance directly to the old issuer and the amount you owe them will be reduced by the amount you transferred. The available credit on your new account will be reduced, as if you had made a purchase.
- It takes about four weeks for the balance to be transferred. Continue to make all required payments until you confirm that the balance transfers were made. Transferring a balance does not automatically close your old account. If you want to close that old account, contact the issuer directly.
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Here are some of the more attractive balance transfer offers on the market:
Citi Platinum Select or Citi Diamond Preferred
Both these cards come with a 0% interest rate for 21 months on both the balance transfer and new purchases. The balance transfer fee is 3%. The ongoing APR is 12.24% - 22.24%.
This special Discover More offer is for 0% interest on balance transfers for 18 months. Consumers also receive 0% on purchases for six months. The balance transfer fee is 3% and the ongoing APR is 11.24-23.24%.
Capital One Quicksilver
Consumers receive 0% interest for 9 months on both purchases and balance transfers. The balance transfer fee is 3%. The APR is 13.24-23.24%.
Updated November 2016
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