Oct 5th, 2006

Credit Card Balance Transfers: The Art of Moving Debt

By David Weliver

Faced with a hefty credit card balance, those low APR credit card balance transfer offers jamming your mailbox are as tempting as ice cream on a sultry summer day.

But are balance transfers a good idea for the deeply indebted?

They can be if you’re careful. But just like credit cards themselves, it’s possible to abuse credit card balance transfers and wind up worse than you started. If you’re paying off one or more credit cards with high interest rates, a low APR on balance transfers – even if it’s only for six months or a year – can save you a bundle on interest. But before you apply, consider the following:

1. Watch Your Rate

If the balance transfer APR is for an introductory period, can you pay off your balance within the that time? If not, is the standard interest rate better or worse than what you currently pay?

2. Don’t Be Late

The balance transfer APR is voided forever if you’re late with a payment just once. Your good APR can be affected by other accounts too. Creditors reserve the right to increase your APR if they perceived you are becoming a higher risk because of other accounts that are delinquent.

3. Not For Sales

The single biggest mistake people make with credit card balance transfers? Making new charges. That’s because the credit card companies apply your monthly payments to low APR balance transfers first while your new charges sit there accumulating finance charges at the standard rate. So as soon as you swipe your new card you negate part of the benefit or your balance transfer APR.

4. Will You Be Approved?

If you have bad credit or a high debt-income ratio, your credit card balance transfer application may be declined. Creditors worry you may use balance transfers to free up additional credit and go even further into debt. Don’t despair if you’re not approved for a new credit card. Continue to work on paying off your debts and your credit worthiness will improve.

5. Consider Your Credit Score

Consider your credit score when applying for a credit card balance transfer. Having more than two hard inquiries to your credit report (loan or credit card applications) per year will put a slight ding in your score, though it’s nothing as significant as if you’re late with a payment or close to your credit limits. If you do transfer a balance, you don’t necessarily want to cancel your old card. It’s a good idea to keep one or two credit cards that you have had for a long time open. Long-standing accounts, even with little current activity, boost your score. You can look up and monitor your credit score with Experian Triple Advantatge.

Think credit card balance transfer is right for you? Start shopping with the following cards or visit our credit card shopping pages. Once you’re on your way to a new low rate, remember to keep applying the seven steps out of debt! Good luck!

Credit Card Balance Transfer Offers

View the best balance transfer credit cards now.

Related Posts

1. 5 Questions to Ask Yourself Before Transferring a Credit Card Balance
2. Are 0% Six Month Balance Transfers Really a Deal?
3. Q&A: What kind of credit score do I need to get approved for a balance transfer credit card?
4. Debt Free Step Four: Negotiate and Consolidate Your Debt
5. Beware Credit Card Rate Jackings (Increases)

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3 Responses to “Credit Card Balance Transfers: The Art of Moving Debt”

1. FIRE Finance says:

   October 15, 2006 at 7:32 pm

   Round Up of Carnival of Personal Finance #69

   The Carnival of Personal Finance #69 was a great carnival of information sharing with over 50 superb posts. Our post was published at Carnival #69 of Personal Finance Our post Investing – Dilbert’s Personal Finance was published at this carnival. Som…
2. Money Under 30 | Should You Ever Pay a Credit Card Annual Fee? says:

   November 8, 2007 at 4:02 pm

   [...] Of course, this example assumes you pay off your balance in-full every month. If you don’t, forget the annual fee, any rewards you’re receiving will be eaten away by finance charges. For this reason, credit cards with annual fees tend to have high interest rates. If you’re looking for a credit card to carry a balance, never pay a fee! Check out my article on credit card balance transfers for some tips. [...]
3. How to Use a Credit Card Responsibly - Personal Finance for the Young and Ambitious says:

   October 23, 2008 at 4:12 pm

   [...] Grace periods are powerful because they give you the opportunity to use your credit card as an ultra-short but interest-free loan. Instead of taking advantage of this benefit, however, many consumers do not pay their credit card balance in full each month, turning their credit card into a revolving credit line. Finance charges (interest) then accumulate on the unpaid credit card balance each month. If you’re in this situation, set a debt-free plan or look into transfering your balances to a low-rate credit card. [...]