Credit Card Balance Transfer, HELP!

Hi Gabrielle.

No, she's not pulling your leg. Credit card balance transfers are meant to enable people transfer credit card balance from one that has a higher interest rate like say 16% to another credit card that charges a lower interest rate, like say 10%, 5% or even 0%. Say you have a $10,000 debt on a card that charges 16%, that interest rate would be much higher than one that charges no interest.

That's one of the savings you have there. More savings if you are delinquent in your payments and you have been charged finance charges. If you transfer credit card balance to a new card, you won't have to worry about these finance charges.

The best and ideal situation is to look for a balance transfer credit card that offers a 0% introductory rate for a period of a year or more than a year. But there is a catch to all these, so you should be very careful, or you end up paying more. Credit card balance transfers usually carry a fee, which could be a flat fee, or a percentage of the amount you transfer. Also, some companies offer a cap, a maximum limit of what they could charge you for credit card balance transfers. There are also instances that the balance transfer rate is 0% or 3% but purchases are charged a different--and often higher rate.

 

Sorry, I think I may have made a complicated explanation. so I'm simplifying this.

The savings you get from credit card balance transfer comes from
(1) the lower interest rate you get on the new credit card
(2) since you don't really default on your debt, you don't have to pay finance charges and other interests that you'd have to pay if you stayed loyal to your current credit card.

The introductory rates can be as low as 0% and the introductory period can be as long as more than a year. But it can differ according to your credit score and history.

These savings can be fully realized if you transfer credit card balance to a new card and try to pay off the balance before the period ends.

 

I am currently looking at credit card balance transfer offers because I want to transfer $4000 on Amex. I have received a lot of mail

offers (particularly persistent is Chase Visa, I've gotten 6 in the mail these past few months) that advertises 0% until March or

February 2011, and I'm seriously, seriously considering taking up one of their credit card balance transfers offers.

Another bank I'm considering if Boa, which has a 0% offer for 6 months.

 

But, you do have to look at several things here.

As was already mentioned, you have to take the fee into account as well. You may pay 3% up front. Does that get added to the BT, or is it at a higher rate?

Can you pay the balance off during the introductory period? If not, what is the rate going to be at the end of that time?

For example, if you are paying 15% now, you transfer a balance and pay 3%, and don't pay it off before the intro period, then the rate goes to 18%, you haven't helped your situation (in all likelihood).

Also, purchases carry a higher rate. All payments will be applied to the balance with the lowest rate first.

So, the card has to have NO balance before the transfer, and you cannot charge ANYTHING to the card during the introductory period.

Otherwise you'll be racking up interest on the higher rate balances and not paying a penny of it off. The interest will keep compounding.

 

ahh, I always forget this point. When you transfer credit card balance from one to another, you should be able to pay off the balance before the introductory rate expires, if you're not,you better have a low APR to start with

 

I think you're putting way too much emphasis on the introductory rate and the period. While both are important, it is not everything you should know. Hedgwick has made some more things to look out for, be sure to check into his suggestions.

An additional suggestion would be to make sure you read the fine print. There are a lot of things you could uncover there.

 

If you can get no or low fees, and a lower rate, it may make sense. If you can't pay it off during the six months or one year or whatever period that no or low interest is, then you need to look at what the rate will be later.

Having a lower interest rate is better, because you pay less interest and more of your payment goes to paying off the balance.

 

Also check with other customers of the same credit card or bank. Some have a habit of:

a) offering 0% balance transfer
b) reviewing your credit (Oh, look! THe new account now has high utilization!)
c) Bumping up the rate to the default APR (~30%)
d) changing the payment due date
e) charging you all and every manner of fees
f) lowering your credit limit (after all, now you're risky)
g) charging you more fees
h) making it look like it was all your fault.

Be very careful because once that starts happening, you won't be getting the 0% offers in the mail from other cards/banks and you'll be stuck.

 

Gabrielle, it's kind of alarming that you trust strangers with financial decisions. I suggest you look at the Internet for credit card offers and then call their customer service so that you'd know for sure what you want and ensure that you don't end up paying more.

 

Behave now, meager. Be kind

 

Hi Gabrielle, I'm always on the look out for rescuing damsels in distress

You might want to try comparecards.com (for some reason, I can't seem to post URLS, but it's comparecards dot com) They have a service that lets you input the things you're looking for in a credit card (like a balance transfer credit card, interest rates, and your own personal data) then they narrow down the choices for you and gives you a list of recommended cards. I think it's a tab called Help Me Choose.

Good luck with your problem!!!