Credit Card Balance Transfer Primer: 6 Essential Questions

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One way to save some money each month or speed up the rate at which you pay down your credit card debt is to take advantage of a low interest balance transfer. Credit card companies are crazy about offering low interest balance transfers. Why shouldn’t they be? They get an opportunity to make money from fees and interest on money that you were loaned by another company.

Before you transfer your credit card balances around you should make sure you understand the important details. Always keep in mind that credit card companies are in business to make money and they make boat loads of it from fees and interest. No matter how good the deal seems, their goal is to charge you fees and interest. You’re responsibility is to read the fine print and ask questions. That way you can make the transfer a smart financial decision rather than a poor one by paying fees and a much higher interest rate than you expected.

Before accepting any balance transfer offer, be sure you can answer the following questions:

1. How long does the introductory rate last? If the introductory APR (annual percentage rate) ends before you are able to pay off the card you could very quickly lose any benefit you gained.
2. What is the card's APR after that teaser rate expires? If the APR after the teaser expires is still better than your current card, great! If it’s higher, you need to seriously consider whether or not you can pay this off before the regular APR starts.
3. Does the teaser rate apply to transferred balances or new purchases or both? If you cut up your old card after transferring the balance, what will happen if you need to use the card?
4. Does that card have an annual fee? This isn’t necessarily bad, just make sure you know and take it into consideration when calculating your savings by transferring your debt.
5. What about late fees and over-the-limit fees? Hopefully you never see these but it’s a good idea to know what they are in a worst case scenario.
6. Are there any balance-transfer fees? Some issuers charge transaction fees as high as 4%, a 4% fee on a $5,000 balance would be $200!

Make sure you read through the credit card offer carefully as the information can be hard to decipher. You should be aware that many offers wave fees for "initial balance transfers" only. This means that fees are only waived when you first accept the card and complete the initial balance transfer form. After that, every other balance transfer is treated as a cash advance and is subject to cash advance fees.

Not everyone who gets an offer qualifies for the super-low rate. While an offer may boast a 3.9% teaser rate that bumps up to 17% after six months, a person may qualify for a card with 7.9% teaser and a regular annual percentage rate of 21%. Also realize that it may only take one slip-up for that super-low rate to disappear. For example, a card with a 9.99% APR might jump to 21.99% after one tardy payment.

If you’ve answered all the questions above and are comfortable with the transfer, than fill out the application and be sure to fill out the balance transfer portion completely and accurately to ensure there isn’t a delay. When the new card approves your transfer request they will send an electronic (or sometimes paper) payment to your old account which may take anywhere from two to four weeks. It's a good idea to make the minimum payment on the old card while waiting for the balance transfer to take effect to ensure you don’t get hit with a parting late fee. In a worst case scenario the old card will owe you some money and you can call and hassle them for a change!

The new card company may send a notice saying the balance transfer is complete. Be sure to call the old card company and verify this. Write down the name of the person you talked to, the date, the time and what was said. You should wait until the old credit card company sends you a billing statement with a zero balance and then cancel the old card!

Recommended credit cards offering low interest balance transfers:

• GM Flexible Earnings Card
• Discover® More Card - Monogram
• Citi® Driver's Edge Credit Card
• Borders 3.2.1SM Visa® Card
• Union Plus MasterCard