Credit card balance transfers enable a person to pay off his old bills by opening a new credit card. It can be considered as a refinance, as your old credit card balance is paid off, and you start off with a new credit card balance with a new rate and terms.
Let’s look at a quick example
Let us suppose that you have an American Express Card with a balance of $1,000 and a 20.99% APR. Whereas you can get a new Visa card with a credit line of $5,000 and 0% APR for 12 months.
If you choose the balance transfer offer using your new Visa card, you’ll pay off the $1,000 balance which you had with American Express with your Visa credit card, and the balance on your Visa card will become $1,000.
You will thus get the advantage of paying 0% APR for the first 12 months on that $1,000, as opposed to 20.99% APR. but you may still have to pay a balance transfer fee, which is usually around $75 or less. There are some cards, such as Citibank, that don’t charge for balance transfers increasing the advantages.
So this way you’ll have to pay a minimum amount on your $1,000 balance each month, and if you pay $120 a month, you’ll be free and clear, with no interest paid. That’s the ideal balance transfer situation.
Where to get a balance transfer from?
Now that you may be convinced to get a balance transfer, the question arises of how and where to get one from?
At the time of application for a new loan, most of the banks and creditors do offer balance transfers. Mostly they have a low interest rate for the life of the balance transfer, or 0% for 12 months on balance transfers.
In case you apply for a credit card online or by mail, it is most likely that you will be offered a balance transfer. But its better to look online and find a deal that suits you best as there are many good deals available due to the competition between banks.
Banks and creditors offer low balance transfers with low interest rates and 0% APR introductory balance transfers hoping that you would do business with them, and ultimately pay a good amount of interest to their bank. Most of the borrowers are not responsible enough to know how to pay zero interest for the entire balance they transfer. Thus their aim is to gather as much money as they can from you.
But if you work sensibly, and stay on top of your monthly payments and due dates, you can transfer your balances before any interest is collected and win the balance transfer game.
To Maintain A Low APR
In order to keep your APR low, make sure you do the following:
- Pay all of your bills on time every month
- Maintain a strong credit score so that you qualify for all offers available
- Read the fine print to see all the transfer fees
- Organize your multiple accounts
- Keep the amount of credit cards to a minimum
Keep in mind that balance transfers may take several weeks to post, so don’t rely on them to pay your monthly credit card bill. Therefore you should continue to pay your credit card bill as usual. If you rely on a balance transfer and wait, it could ruin everything, and kill your low-APR and 0% APR hopes for a long time.
