How to Transfer Your Debt Balance To A Credit Card and Save.
Filed Under (Credit Cards Blog) by creditblogger on 30-07-2008
We all know that the state of the economy is terrible these days. With the gas prices and the overall cost of living going up, there is no excuse for not trying to get the best interest rate on your debt balances. Transferring balances is scary to a lot of people. For some reason people believe that they are going to end up in a worse place if they transfer their balances to a credit card. Don’t get me wrong. It could happen. But here are a few tips on how to transfer your debt balance and save money in the process:
- It’s all about rates: finance may look formidable on the surface, but it is really a glorified form of math. There is no magic involved, and if you know anything about math, you know that tranfering your debt balance from a high interest account to a low interest account can only be good. The goal should be to have the lowest finance charge possible and to pay your debt as soon as possible so you can have more money for yourself to invest.
- It’s all about the right cards: when it comes to transferring your balance from a high interest account to a low interest account, you should always choose the cards that are specifically designed for balance transfers. There are many cards that allow you to balance transfers but they give you a high rate on those balances, which could be lower than your current rate but not as low as it should be. Do a little research and find out the cards that offer the best introductory offers for balance transfers. If you are a business owner, try cards from companies that target your type of business. For instance, Advanta Corporation has a selection of cards that offer you 0% APR for 15 months on your balance transfers. American express also has a few cards that come with similar features. Look especially for the post-intro APRs to make sure you are not back in the same place after the introductory period is done.
- It’s all about the balance transfer fees: it is surprising how many people forget to read the terms and conditions of the credit cards they apply for. We have said it many time before, but make sure you ALWAYS read the terms and conditions. Your balance transfer fee could be as low as $0 or as high as 5% of the transferred balances. If you are transferring your auto debt (let’s say $20,000) to your new credit card with 5% balance transfer fee, you are looking at a $1,000 fee (most credit cards I know have a ceiling of $50-200 for this). It may still be worth it in a long run, but there is always a better option available.
- It’s all about the conditions: Some companies offer you a low APR only on balances that you transfer when applying for their credit card. Some may put restrictions on the amount you can transfer. So again, make sure you read the terms and conditions carefully.
Now here is the part that many miss when they start the balance transfer process. Unless you are made aware by your old financing company that your transfer has gone through, you will have to pay any monthly payments that you owe them. The balance transfer could take some time, so don’t stop paying your monthly payments as that will get you in big, did I say big?, trouble.
I know a few people who are serial balance “transferrers.” They tranfer their balances to a card for 15 months and once the introductory time is over, they jump to another card. While credit card companies hate “gamers,” you can certainly use this tactic. Keep in mind that each credit card account that you open can lower your credit score and make you a riskier proposition for credit card companies to take on.
Whatever you do, remember the ultimate goal. Lower interest rate and/or faster debt payment.
Recommended card: There are many good balance transfer cards out there on the market. We have a good selection of balance transfer credit cards here. But my favorite balance transfer credit card by far is the life of balance transfer card from Advanta. Advanta gives you 3 months to transfer your balances to this card and lock them in for 2.99% APR for the life of your balance. If you have a car loan with 8% interest rate, you can easily transfer it to Advanta card, and lock it in for the rate of 2.99% for life! They also have a ceiling of $90 on their balance transfer fee which makes this card even more attractive.
You also get 6% cash back or travel rewards, but these pale in comparison to the main feature discussed above. I do encourage you to explore other balance transfer credit cards that are out there, but the card by Advanta is the best one I have seen for large balances (you can apply for it here).
Good luck transferring!
