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Balance Transfer

Interest rates are constantly changing and can get completely out of hand. If your interest rates are too high a good way to deal with it is to get a balance transfer. You first need to shop around for a card with a significantly lower interest rate. Then you have that company transfer your other balances to their card. Many companies have a deferred interest or same as cash offer on balance transfers, when handled properly this can save you money as well.

Another way to handle increasing interest rates is to contact the card company you are with and ask them to lower your interest rate. Generally you can do this every 6 months if you have a good payment history with the company.

How To Transfer Balances

Balance transfer is usually conducted in one of three ways:

  • As a way to get new customers, credit card companies will send out offers with low or zero percentage interest rates for new customers. Usually making a phone call or filling out the paperwork is all you have to do. Watch for sneaky fees though.
  • Once you have done your credit card comparison shopping and found the card you want, just make a phone call to the credit card company and request the transfer. They will take care of the details. You may be limited by the available balance on the new card.
  • Credit card companies occasionally send out “balance transfer” checks or “convenience checks”. These look like regular checking account checks but are geared toward the credit card. All you have to do is write out the amount transferred and send it to the new credit card company. These checks usually have an expiration date so pay attention.

Teaser Rates

Something to watch for when shopping for balance transfer rates is the” teaser rate”. This is a low introductory rate used to entice new customers. Credit card balance-transfer offers with very low or even zero rates are still available however these are short term rates that quickly revert to the higher rates on the card. Make sure you plan to pay off your balance before the low rates expire. Write yourself a note so that you know when they are due to change. Staying on top of those dates can save you quite a bit of money.

Sneaky Fees

While interest rates are always a big concern and can cost you a lot of money be sure to watch out for fees and transaction costs, these can be even worse. When shopping for a credit card always check the annual fees, and “transaction fees” on your balance transfer. The transfer fee can be as high as 4% and simply takes away any savings you might realize on the transfer. Don’t spend money to save money.

Some banks process transfers as cash advances and cash advances frequently have much higher interest rates than credit purchases. There may also be additional fees hidden in the small print. Cash advances don’t usually have a “grace period” so they are accruing interest daily, this too can add up to much more money than you expected. Some banks will waive these fees; make sure to ask them about it

Fees, fees and more fees, the important thing is research and read the small print. Make sure you know exactly how much your balance transfer will cost. Then you can determine if this technique it will actually work to save you money.

Balance Transfer Strategy

All this talk about balance transfers has a point. Saving you money! To do this properly you have to be wise and disciplined. Transferring balances can save you hundreds of dollars in interest charges or bury you in debt. So it is really important to:

  • Do the research, find the right cards,
  • Watch out for sneaky fees
  • Keep track of the expiration dates, don’t let these offers expire
  • Stay ahead of the curve, start setting up your next transfer before the one you have expires
  • Pay your bills on time, if you don’t these offers have huge default fees and everything you tried to do falls apart.

Hints & Tips

  • After the balance transfer, cancel your old card.
  • Try to put all balances on one card, it’s easier to keep track of this way.
  • Don’t carry more than a couple of cards with open balances.
  • Keep one card for medical emergencies.
  • Watch for sneaky fees.
  • Pay early or on time.

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