It's no secret that you can save money if you transfer a credit card balance to a card with a lower interest rate – if you pay attention to the details, that is. Follow these five rules to get the maximum benefit from a credit card balance transfer.
1. A transfer is not a payoff.
When you move debt from high-rate cards to a single lower-rate card through a credit card balance transfer, you’ll save money, but the balance won’t disappear. Stop using the high-rate cards and concentrate on paying off the transferred debt. Don’t let the balances creep up again.
2. Watch out for Fees.
Be sure to find a deal with true value. Many credit card companies charge a fee to transfer a credit card balance, as much as 5% of the amount you are transferring. Adding that fee to your balance could wipe out any savings. Fortunately, there are options, including Hanscom FCU's no-fee credit card balance transfer. No matter what offer you consider, read the fine print and calculate your real savings before you act.
3. Not all balances are created – or paid – equally.
Credit card companies can choose how to apply your payments. If you have a different rate for new charges and transferred balances, be sure the higher rate debt is paid first. Otherwise, you’ll keep paying top dollar on your balance.
4. Simplify your payment, don’t stretch it out.
The goal of a credit card balance transfer is to consolidate your debt into one convenient payment. Commit to paying well over the minimum to reduce your balance faster and save even more money.
5. Don’t try to repeat a transfer.
You may be tempted to transfer a credit card balance a second time, especially if you still have a big balance on the card your originally transferred the debt to when your rate’s about to expire. Don’t – it’s bad for your credit score. Lenders will see you as a riskier borrower when it comes time to finance a vehicle or a home.