The Anatomy of a Balance Transfer

Posted April 27, 2016 by cccadmin in

One of the best ways to save money as you work to pay down debt is to use a credit card balance transfer. A balance transfer can help you put more money toward your debt’s principal, allowing you to pay less in interest. When you aren’t paying interest, your debt is reduced faster.

There are a number of credit cards that offer low balance transfer rates. When you are only paying 1.99% on a credit card balance, more of your payment goes toward the principal, which is an improvement over paying 15.99% – or more – on your debt. With today’s competitive credit card market, finding introductory rates of 0% are commonplace.

When evaluating balance transfer offers pay attention to:

  • Introductory rate: What interest rate will you pay. Balance transfer credit cards usually range from 0% to 9.99% when it comes to introductory rates.
  • Introductory period: Next, find out how long you will receive the introductory rate. The longer the into period, the better. You will have more time to pay down your debt at the low rate. Be aware, too, that often the purchase APR is different from the balance transfer APR. You might get 12 months for your balance transfer, but see the regular rate on purchases from the start.
  • Balance transfer fees: Realize that there might be a balance transfer fee. Normally, this is a percentage of the total amount you transfer, usually between 1% and 3%. Add up the fee to see if it is worth paying. Most of the time, it usually is.
  • Regular rate: Find out what your regular rate, or “go-to” rate will be after the intro period ends. This is a good way to prepare for what’s next.
  • Other card features: Your credit card might also have other features. Look at rewards, other fees, and try to avoid an annual fee as you work to pay down your debt level.

Getting the most out of a balance transfer often requires a plan. Try to pay down your debt as quickly as possible during the intro period. Don’t take on new debt while you work to reduce your current debt. Be prepared for what happens when the into rate expires.

Here’s an infographic that helps explain the process along with tips to get the most out of a credit card balance transfer:

The Anatomy of a Balance Transfer