Everything You Need to Know About Balance Transfers

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credit card advice

Alexandra Leslie
By: Alexandra Leslie
Posted: August 1, 2014
Our personal finance experts dish out the most trusted credit card advice on the web, including juicy tips, tricks and secrets from inside the credit card industry.

Having a high interest rate on a credit card can make your balance grow quickly, especially if you already carry a large balance.

For people scraping by to make the minimum payments, a double-digit interest rate can make it difficult to ever crawl out of debt.

If you want to make major progress on your debt repayment but are being sandbagged by high interest, you may want to consider transferring your balance to a low-interest credit card.

Many credit cards offer low introductory APRs on balance transfers, some even at zero percent, which can help you pay down your principle rather than wasting money on interest payments.

Read on to learn everything you need to know about credit card balance transfers.

Introductory rate period

No good balance transfer APR lasts forever. Most credit cards with low or zero percent interest rates on balance transfers are temporary to attract new customers.

When you are applying for balance transfer credit cards, look for one with a zero percent introductory APR if possible, but pay attention to how long the introductory rate period lasts.

It might be more favorable for you to go with a card with a 3 percent introductory APR on balance transfers for 18 months than a zero percent introductory APR for six months.

You should also consider what the rate will be when the introductory period is over and make sure that rate will work for you in the long run, as card-hopping is not a smart strategy.

“Read the terms

closely before applying.”

APR on purchases

When you see an introductory APR offer for balance transfers, the card issuers often extend the same low introductory APR to purchases. However, some cards only offer an introductory rate for purchases and some only for balance transfers.

Read the terms of the card closely before applying. If a low interest rate on purchases is important to you, make sure the terms say this introductory rate applies to both balance transfers and purchases.

Balance transfer fees

Balance transfers generally aren’t free. Nearly all credit cards charge a balance transfer fee, which is usually around 3 percent.

Before you transfer your balance, calculate what this fee will be and make sure the new low APR will make up for it. If the math doesn’t work in your favor, don’t bother.

Penalty rates

For some credit cards, your low introductory APR disappears the minute you pay your bill late. Your introductory period will no longer matter and the APR can shoot up higher than 20 percent for simply failing to pay your bill on time.

Some credit cards have no penalty rate, so read the terms closely before applying and try to avoid a card with that fee. If you must get a card that has a penalty rate, do everything you can to make your minimum payments on time.

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