Balance Transfer Credit Cards

Are you looking to transfer a balance and save on interest? These cards can eliminate interest charges for 6 months or longer so you can pay off your card sooner and save money in the process.

Sometimes transferring a balance can be a good idea, a lot depends on the terms available and the reason you want to transfer. If you are able to get a card with a lower interest rate (or preferably a zero interest grace period). Transferring a balance can be a way to get a jump on paying off your balance. If it allows you to put the money you would have paid in interest toward paying off your balance you could be hundreds (or even thousands) of dollars ahead.

Balance Transfer Credit CardMost credit cards that offer a Zero interest grace period for transfers will give you between 6 and 18 months interest free before they start charging you interest. If your credit score is good enough to qualify for one of these cards that is the way to go.

However, if you are already running a balance you may not qualify for a zero interest card. At that point the decision becomes a bit more difficult. You have to ask yourself a few questions:

1) Will I handle this additional credit wisely? Or will I just be digging myself into a deeper hole?

2) Does the new card have a considerably better (lower) interest rate than the old card?

3) Is there a transfer fee involved?

4) If there is a transfer fee, is the interest savings worth the extra transfer expense?

In the table below you can see the average difference in credit rates charged based on the type of card you are applying for. "Low Interest" credit cards usually also imply having a "good" or "excellent" credit rating. So by improving your credit rating it can make a big difference in what you pay. And remember, your savings in interest can go toward paying off your debt even sooner. (Be sure to look below the table for a trick to transfer balances even if it isn't a "balance transfer" card)


Here's a Trick to Transfer a Balance without paying a transfer fee:

Even it it's not a "Balance Transfer" card, (or if there is a transfer fee) there is a way to effectively transfer a balance from one card to another without actually officially transfering the balance and therefore not paying the transfer fee.

Suppose you have a $5000 balance on credit card "A" and you apply for a new card but it has a 3% transfer fee. 3% of $5000 is $150, which would certainly cut into the savings of transfering to the lower interest card. Let's also suppose you spend $2000 per month on food, gas and other expenses.

What you do is charge absolutely everything you can on your new card. Now I don't mean go out and buy stuff you don't need. I mean put all of your regular expenditures on the new card and take the money you would have used to buy those things and pay off your old card.

So at the end of the first month your cards will look like this:

Old Card New Card
Balance $3000 $2000

At this point the new card will not owe any interest for the grace period. So even if the interest rate on the new card is not zero you are entitled to a grace period on new purchases which is generally between 20 and 30 days. Of course the old card will still rack up some interest but it won't be as much because you paid $2000 toward it rather than just paying the minimum.

During the second month you will do the same thing. But this time you will have to pay something toward the second card as well (minimum payment). Assuming that your 1st credit card had an interest rate of 24% (2% per month), your card will rack up $60 in interest over the second month($3000 x 2%) here is what your cards balance will look like at the end of the 2nd month.

Old Card New Card
Balance $1000 + $60 interest $4000 - minimum payment
In the third month you will have your entire balance transferred to the new card and you should continue to pay as much toward paying off the new card as possible. Do not pay the minimum! And do not start charging stuff on your old card! You are saving on interest so those savings at least should go toward paying off the credit card balance.

Do everything you can to pay off your debt. If you can find stuff around your house that you don't need... sell it on e-Bay and put that money toward paying off the balance. Take a part-time job... do whatever it takes... now that you have a lower interest rate take advantage of it and pay off that debt.

Interestingly, most people who really put their mind to it and make an all out effort can actually pay off all their credit card debt in between 18 months and 2 years. All it takes is putting your mind to it and taking the action necessary.

Imagine how it would feel to not have that credit card debt hanging over your head! Isn't it worth the effort?



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