The Balance Transferring Act

The credit card balance transfer is popular with credit card users.
The balance transfer can offer interest-rate savings on credit card debt. A balance transfer simply means moving debt from one or several credit card accounts to a low or no-interest credit card account.

These super-low teaser rates will last for about six months to a year, on average, with most card issuers. A cardholder may be offered a low-interest balance transfer rate by one of their current credit card issuers, or they may choose to apply for a new credit card to get this tempting rate.

Before you consider any credit card for any reason, know what you’re getting into. Start by reading and understanding all the terms and conditions of the credit card, not just the ones pertaining to the transfer in big, bold letters.

Find out the annual fee, default and other rates, and know what the card’s APR will be when the introductory period is over. I can’t count how many times I’ve received an offer that looked interesting until I got half way through the fine print on the back page.

Credit card issuers still plan on making money from this deal.
Before you decide if the balance transfer is right for you, you should consider the other side of the coin. Why would the card issuer offer such a low rate to begin with, and what’s in it for them? Understand that when a credit card issuer offers a low-interest balance transfer, they are making an investment. Why else would they loan you money for free? Credit card issuers are in the business to make money, and this is a creative way for them to potentially increase their profits in the long run.

To begin with, many card issuers charge a balance transfer fee; 3% of the balance is pretty standard now. So, add that 3% to whatever rate they’re offering you to get a realistic idea of the balance transfer savings. There may be a dollar-amount cap on the fee, which may range from fifty dollars to three-hundred, or no cap. These fees are usually charged immediately when you start the balance transfer process. It’s important to know what up-front fees you’ll be paying for the interest savings; read all the fine print carefully.

Know that their best rates are reserved for consumers with excellent credit. The credit solicitation may have “0% balance transfer” in big bold letters on the front of the credit offer, but that will be the best terms possible to those with perfect credit. Receiving a pre-screened credit offer does not guarantee that you will get the best terms that are advertised.

If you respond to the credit offer with less than perfect credit, the credit card issuer may adjust the introductory rate to one that they deem appropriate for your credit standing. Those with credit blemishes or new credit histories may not realize that they are transferring a balance to a new card that doesn’t offer much benefit in the way of interest savings. Be sure to check out the actual rate you’ve been given once you receive your new credit card.

Also, see if the interest rate applies only to the transfer amount, or if new purchases will also get the low rate. If different rates apply to new purchases and balance transfers, many card issuers will apply your payments to the lowest interest debts before they apply it to your higher rate debts.

So if you transfer a balance of $5000 at 0%, and your new purchases get the standard 18%, you’ll be paying that higher rate on everything you buy, without a