Transferring Credit Card Balances - What to Look For
July 21st, 2008
We’ve all received plenty of offers in the mail to transfer credit card balances at low interest rates. Usually the offers involve receiving a low interest rate on the transferred balance - sometimes 4.99% or even 0%. While these offers can be excellent deals if used properly, we think that it’s important for credit card customers to look at all the fine print and completely understand the offer before signing up. We’d like to make sure our readers are making informed credit decisions, so here are our tips on choosing the best balance transfer offer.
- The Teaser Interest Rate - The most important thing to look at is the “teaser” interest rate. This is the interest rate that is being offered on transferred balances. Of course, the lower the rate, the better. But does it make that much of a difference if the interest rate is 4.99% versus 0%? Let’s take a look at some numbers. First, let’s assume that you have a credit card balance of $4,000 and you want to transfer that to a low interest balance transfer credit card. If you go with the 0% interest rate balance transfer offer and make payments of $75 a month, at the end of one year, you’ll have a balance of $3,100. Since your entire payment goes to pay down the balance of the credit card, you’ll get it paid off much more quickly. Now, let’s say that you choose a credit card balance transfer offer with 4.99%. Over the same time period and with the same monthly payment of $75 a month, you’ll pay about $180 in interest. At the end of one year, your credit card balance will be about $3270. By choosing the 0% credit card balance transfer offer, you’ll save $180 and will have a $170 lower balance at the end of a year. Clearly, the interest rate is very important.
- The second important factor to pay attention to is the length of the balance transfer offer. Some offers are only for nine months, others are for up to 18 months. We’ve even come across some credit cards balance transfer offers that offer the low interest rate for as long as it takes to pay off the transferred balance. This means that the low balance transfer interest rate they are offering you will apply for the specified period of time. After that, the interest rate typically adjust upwards to the credit card’s standard purchase interest rate. This means that you should try to pay the credit card balance off by the time the balance transfer interest rate ends. Of course, not many people can do this, but you will be saving lots of money on interest in the mean time. The longer the balance transfer interest rate period, the better.
- Another important factor in choosing the right credit card balance transfer offer is if there are any transaction fees. Transaction fees are fees that some credit card companies tack on to the balance transfer when you move the balance to their credit card. Look closely at the credit card’s terms and conditions to determine the transaction fee. Many cards will waive the fees for balance transfer offers when you apply for a new credit card. However, be sure to check before you open a new account. Balance transfer transaction fees can be as high as 3% of the balance that you are transferring. On a $4,000 balance transfer, that is a fee of $120. Some credit card companies limit the amount of transaction fees they will charge - typically up to $100, but some do not.
- Finally, some credit card companies will take the low interest balance transfer offer away if you are late on a payment. This is another piece of information to look for when applying. It’s always important to read the entire terms of the credit card offer before applying. This is one items to look for. This is another reason to make sure that you pay on time. If you lose the low interest “teaser” rate becuase you were late on a payment, the company is unlikely to offer you that low interest rate again.
It’s important to make an informed decision when it comes to your credit and applying for credit cards. We hope this information is useful in making a good decision when it comes to applying for a new credit card in order to get a good balance transfer rate.
Based on the factors above, we can recommend a few excellent credit card balance transfer offers:
- Chase Platinum Mastercard - Chase is offering a 0% balance transfer interest rate for 12 months. There is no annual fee and there are no transaction fees.
- Blue from American Express - Blue from American Express is a great way to have a low balance transfer interest rate, plus a low purchase interest rate. Right now, American Express is offering 0% interest rate on purchases for 15 months, along with a 4.99% balance transfer interest rate for as long as it takes to pay off the balance transfer. Two excellent offers on the same credit card!
- Advanta Life of Balance Credit Card- This Advanta offers is, in our opinion, the best balance transfer credit card we’ve ever seen. Advanta is offering a 2.99% interest rate on transferred balances for as long as it takes to pay off the card. Unfortunately, this offer is only for businesses, but if you have a small business, this is an outstanding opportunity to lock in an extremely low credit card interest rate.
