Get the Most From Your Balance Transfer

A balance transfer can be a tricky transaction. You might start out fully intending to pay off the balance while you still have a great interest rate. But if you’re not careful, you could end up still owing a big balance after your promotional rate has expired. If you want to get rid of your transferred balance quickly and at the lowest cost, you’ll have to be diligent about paying off the balance and avoiding costly mistakes.

Make sure you evaluate all the offers available to you. Don’t automatically pick the one with the lowest interest rate because it might also have the lowest introductory period. For example, you could save more on an 18-month transfer with a 3.99% APR than a 6-month transfer with a 0% APR. Use an online balance transfer calculator to figure out which transfer offer will give you the most savings.

An annual fee will increase the cost of transferring the balance, especially if your current card doesn’t have an annual fee. Choose a balance transfer card that doesn’t have an annual fee. Nearly all balance transfer cards charge a balance transfer fee. Of course, the lower the balance transfer fee, the better. And if you find a card that waives the fee, that’s even better, assuming the deal itself is a good one.

Pick a credit card with a reasonable post-promotional rate. Yes, your goal is to pay off the full balance transfer before the promotion ends. But, if that doesn’t happen, your post-promotional rate should be a good one – one that won’t eliminate all the savings you gained during the promotional period.

Calculate the monthly payment needed to pay off your balance before the introductory period expires. A credit card payoff calculator can help you figure out that amount – don’t forget to include the balance transfer fee in your payoff amount. Once you know what payment you need, look at your budget to decide whether you could make that payment.

Pay the balance off before the introductory period expires to get the most benefit from your balance transfer. Depending on your post-promotional interest rate, your credit card could get costly after the balance transfer rate expires.

Don’t make other purchases or take out cash advances with the same credit card as your balance transfer. Credit card issuers allocate payments differently when you have multiple balances with various interest rates. Any payment above the minimum will go toward the balance with the highest interest rate. So, if you have a balance transfer with a promotional rate and a purchase balance at a higher rate, your payments will go toward reducing the purchases balance first.

Limit your credit card purchases in general. It’ll be much easier to pay off your balance transfer if you don’t have other expenses tugging at your wallet. Keep your credit card purchases to a minimum so you can give your balance transfer your full attention.

Make your payment on time every month; otherwise you could forfeit your promotional rate. By law, promotional interest rates must last at least six months. But, the card issuer can impose the penalty rate if you fall more than 60 days behind on your payment. That’s basically two missed payments. You could suffer the same fate as the result of a returned check, so also be sure that there’s enough money in your checking account to cover your credit card payment.