Balance transfer tips for saving on
credit card interest
Why, when and how to make a credit card balance transfer.
If one or more of your credit cards is carrying a balance and has a high interest rate, the monthly charges on that balance could be costing you some serious money. And if that’s the case, a credit card balance transfer could make a lot of sense. By transferring your credit card debt from several high-interest cards to a single card with a lower rate, you could effectively reduce the amount you owe, freeing up more money every month to pay off your balance faster — while helping keep better track of your debt.
Here are some balance transfer tips to help you make the most of a low introductory-rate credit card offer.
Lowering your interest rate with a credit card balance transfer can help you take control of your debt and pay off your balance faster.
- Maintain a solid credit score. The higher your credit score, the better your chances of receiving low introductory rate balance transfer offers. Get tips on how to improve your credit score.
- Look for a long introductory period. The initial rate for these types of offers usually lasts from six months to a year. When evaluating different balance transfer offers, look for a credit card with a low introductory APR and try to pay off your debt at the lower introductory rate before that rate expires.
- Factor in the regular rate. Depending on the size of your debt, you may not be able to pay it all off at the low introductory rate. If you think you’ll still be carrying a balance once that rate expires, make sure you know what your “regular” rate will be.
- Evaluate the transfer fee. Balance transfer fees are often 3% to 5% of the transferred amount up front or a minimum of $10 (the amount appears on your first statement). On a $5,000 balance transfer, that could mean a fee between $150 to $250. So include the fee in your calculations to figure out if you’ll save money over the long run. Remember, the savings from the lower interest rate will often be greater than the transfer fee.
- Keep payments current on your old card. Once you apply for a credit card balance transfer, it can take two weeks or more for the transfer to be completed. Don’t fall behind on your existing credit card payments. Once your debt is moved from that original, high-interest-rate card, be careful not to incur more debt on that old card.
- A couple more balance transfer tips to remember. In general, balance transfers have one APR, and other transactions — like purchases, cash advances and fees incurred — each have different interest rates. This is important to know, because when you pay more than the minimum amount, issuers are required to apply that extra amount you paid to the debt with the highest interest rate (whether that be your balance transfer, purchases or access checks.)