Best Balance Transfer Strategies For Credit Cards

Balance transfers can be a great way to help get control of your credit card debt. These special offers can allow you to transfer your balance from a card with a high interest rate and high monthly payments to a card with a low interest rate (perhaps even a  0% introductory APR) and more manageable monthly payments. The lower rate can make it possible to pay off your balance without losing money to interest rate charges. As long as you don’t increase your debt by overusing your card, you can pay down your balance and be on your way to being debt-free.

There are different approaches to transferring balances. Each user must find the strategy that is right for them.

Despite different balance transfer strategies, there goal is usually the same for everyone: paying off the entire balance.

Most cards lure in new customers with 0% interest offers. These offers can last from six months to a year-and-a-half (and, on rare occasions, even longer). Some people think that this is a gimmick. However, if you are able to play the game correctly, a 0% introductory offer can be useful, especially if you want to reign in your credit card debt before it gets too bad. The first part of any balance transfer strategy is to stop building debt. That means not using your credit card for large purchases. Some people go as far as opening a card for balance transfers and not using it for any purchases at all. If you think you’d be tempted to charge a purchase on your new card, simply keep it at home and don’t activate it. The balance transfer will still go through, but the card will be unusable. If you must, have a second card for purchases. However, keep in mind that the balance transfer is helping you pay down debt, so building debt on another credit card will make it harder to pay down debt.

What’s the catch of a balance transfer offer? In many cases, there is a one-time fee charged to transfer the balance between cards. This can be between 2% and 5% of the amount of the transfer. There is sometimes a cap on how much can be charged (some fees top out at $50 or $100). You will have to read the fine print to see exactly how much it will cost you. The other thing to look out for is the length of the introductory period and what the interest rate will be after the introductory period. The introductory period has to at least be long enough for you to pay down a large portion of the balance. Regular interest rates could be between 15%-20%, maybe higher, after the intro APR period has ended. If the debt is not completely paid off, you can transfer the remainder to take advantage of a different 0% offer. The risk for this strategy is that a major change in the economy or a change to the rules that credit card companies have to operate under will make it more difficult to qualify for 0% offers in the future.

For this reason, some people look for cards with a low fixed interest rate rather than a 0% introductory offer. A low fixed interest rate will never charge (as long as your account remains in good standing). You will be paying (2%-9%) interest, but you won’t have to worry about balance transfers. If you can get a low enough interest rate, you should be able to pay down your debt nearly as quickly as if you had a 0% APR offer. However, if you don’t pay down your debt quickly with a fixed rate card, you don’t have to worry about a change in the interest rate.