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From the Experts at Credit.com

When Do Balance Transfer Credit Cards Make Sense?

by Lucy Lazarony

When Do Balance Transfer Credit Cards Make Sense

If you’ve got a big balance on a credit card with a high interest rate, transferring a balance to a card with a lower interest rate could make financial sense.

Why? Because you’ll pay less money on interest charges and more of each payment will be applied to your outstanding debt. However, there are several things you need to consider before you apply for a balance transfer credit card.

Start with a Credit Check

Before you start shopping for a new balance transfer credit card, check your credit score.

The best offers with rock-bottom introductory rates of 0% for a year or more are reserved for consumers with good credit.

Not sure if your credit will qualify you for the best balance transfer offers available? Get a free credit score with Credit.com’s free credit report card tool and find out where you stand.

If you have a credit score of 700 or higher, your good credit score should qualify you for a new credit card with a low APR.

Watch Out For Fees

As enticing as low rate balance transfer credit card offers may be, it’s important to factor in the cost of fees. You may pay a balance transfer fee of 2 to 5% on the balances you transfer to a low interest rate credit card.

On the other hand, some balance transfer cards may charge slightly higher introductory rates and no balance transfer fees. So do your research, read the fine print and weigh your options carefully.

Make Good Use of the Teaser Period

How long will the introductory or teaser rate on a balance transfer offer last? Is it six months, 12 months, 18 months? The months when you are paying little or no interest on your credit card balance are prime opportunities for paying down your debt.

So take a close look at your budget and apply as much extra money as you can to your outstanding credit card balance during the introductory period.

The ideal would be to pay off the full amount of your balance during the introductory period. If that’s out of reach, work out a pay-off plan that fits your budget. And stick with it until the debt is paid in full.


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  • Me110wM00d

    I have a very recent installment loan that was opened for a home improvement project. The rate I ended up getting was higher than what I was originally quoted, but it was too late to cancel the job when I found out it was going to be higher.

    I have a current promotion on my credit card for either 0% for 15 mos. and 3% fee or 4.99% for 21 mos. and $0 fee balance transfer. I have figured that I can save a lot on interest by using either transfer offer, but should I just keep the installment loan? I will take a ding for the increase in credit utilization and lose out on the payment history for the installment loan, but will it hurt my score enough to justify passing on the $1,000’s in interest savings?

    • http://www.Credit.com/ Gerri Detweiler

      Thousands of dollars in savings is hard to pass up! could you do a combination of the two? Use the balance transfer to pay off most of the balance on the installment loan, then pay off the remaining installment loan over a few months’ time? That should result in a very small amount of interest (double check how they calculate interest) and you’ll have several months of payments on the installment loan before it is closed. What do you think?

      • Me110wM00d

        I would like to avoid having two payments on the “same balance” even if for a few months. My budget is kind of tight. How soon would be too soon to pay off the loan, in your opinion? 6 mos? 12 mos? I looked at the numbers again and depending on the variations on how much I pay toward the debt, the savings could be up to around $1,000 and not $1,000’s. Essentially, we’re looking at $3,400 dollars at either 17.99% or the promotional rates.

        • http://www.Credit.com/ Gerri Detweiler

          I should have asked you in the beginning what you are trying to accomplish. Do you not have other installment accounts on your credit reports, so you are trying to establish one?


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  • Meet Our Expert

    lucy_lazarony GravatarLucy Lazarony is a freelance personal finance writer. Her articles have been featured on Bankrate, MoneyRates, MSN Money, and The National Endowment for Financial Education. Prior to freelancing, she worked as a staff writer for Bankrate for seven years. She earned a bachelor's degree in journalism from the University of Florida and spent a summer as an international intern at Richmond, The American International University in London. She lives in South Florida.
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