Once you decide that a 0% balance transfer is the right financial move for you, it is important to think about how you manage your credit card debt and realistically examine your financial situation before you select a 0% balance transfer credit card. By taking a few moments to think about how you will handle paying off your credit card, you can save yourself some extra money and get yourself on track to be credit card debt free. Here are key questions you should ask yourself before choosing a balance transfer card:
How long do I need to repay my balance transfer?
While this may seem like an easy question, it is vitally important to realistically consider how much you will be able to pay each month. If, for example, you have $5,000 of credit card debt and know you can afford to pay $400 a month, then getting a balance transfer card with a 0% for 12 months should be sufficient. This can also save you money on fees, as you can sometimes find cards that offer a 0% APR for 12 months on balance transfers and cash back bonuses of up to $100 that can make your balance transfer virtually free.
Unfortunately, many people make the mistake of choosing a credit card with lower transfer fees and a shorter 0% balance transfer period to save $50 or $100 only to find themselves paying 14% interest much sooner than they need to be. In the past, when no fee balance transfers existed, many people chose no fee offers with 0% rates that only lasted 6 months over 0% balance transfer cards with 3% fees and longer 0% rates. When the financial crisis hit, some of these people who hadn’t repaid their balances couldn’t get approved for new cards and were stuck paying 15% interest.
Thus, the most important thing to consider when choosing a balance transfer credit card is how much time you need to repay your card. If you tend to have trouble sticking with a strict payment plan, choose a card with the longest 0% rate available, even if the balance transfer fee is a little bit higher.
Which 0% balance transfer credit card should I choose?
This is a slightly easier question, though there are a few issues to be aware of. For example, if you have a balance on a Citibank credit card, you cannot transfer that balance to another Citibank credit card with a 0% rate. The same is true regardless of the credit card company you have debt with. Thus, the first rule of choosing a 0% balance transfer credit card is that you must choose a card from a different company. (This does not apply to Visa and Mastercard, only the bank that issues the card.)
Once you’ve weeded out the cards you can’t transfer balances to, the next thing to consider are the length of the 0% period and the balance transfer fees. If you decide that having more time will help you the most, choose a card with the longest 0% APR on balance transfers.
With the longest 0% balance transfer credit card offers, you may have to pay a higher balance transfer fee. However, this is not always the case, as you can presently get a 0% APR for 18 months with the Citi Platinum MasterCard and only pay a 3% fee. Plus, there are plenty of credit cards that offer 0% rates for as little as 6 months and charge 4 to 5 percent fees, so again, getting a long rate is more important than the small fees you will pay.
How should I do my balance transfer?
The best way to complete your balance transfer is to apply online, then wait and transfer your balances on the phone after you get your card in the mail. This allows you to review your credit limit, long term interest rate, and other key factors. Some credit card companies send balance transfer checks to approved applicants. Do not use them. Over the past few years, I’ve received many reports from people who encountered problems with these checks bouncing even though they had enough credit.
What is the Best Balance Transfer Credit Card?
While I personally think Discover balance transfers are best, some Citibank balance transfer cards offer longer 0% rates. Discover is hands down the better credit card company, but if you’re just using your card for a balance transfer, the best balance transfer card may simply be the one with the longest rates.
Final Thoughts on Balance Transfer Credit Cards
I like to call balance transfer credit cards the only free lunch in the credit card world. While balance transfer fees make them slightly less than free, the money you can save on interest with a balance transfer may astound you. In general, transferring a balance from a card with a 15% interest rate to one with a 0% rate for just a year can save you close to $90 for every $1,000 you transfer. While the savings alone are great, one of the more important benefits of balance transfer credit cards is that they can help you repay your credit cards faster. Just be sure to use the money you save on interest to pay down your balances so you can get the most out of your balance transfer.
More Information on Balance Transfers
For more information on balance transfers and to view up to minute offer details, please see the 0% APR balance transfer section of Smart Balance Transfers. At Smart Balance Transfers, you can learn about credit cards, compare offers and apply online.