Credit Card Balance Transfer: What is it?

When to Say 'Yes' To a New Credit Card 

 A credit card balance transfer allows you to move the amount of debt you have on one credit card onto another credit card. 

Here is why you would want to make a credit card transfer and move your debt from one credit card company to another.

Let's say: you have a balance on your credit card of $15,000. Your interest rate is 20%.

It would take you 18 months to pay off the $15,000 on your credit card assuming you pay every month. If you continue to use your credit card for new purchases you will be stuck in a cycle of debt forever. You will be wasting a lot of money just paying off the interest. 

20% interest is very high. But that is what credit card companies charge. I pay the balance off each month. I try to be frugal, hence this website ;) 


0% Interest Credit Cards in the Mail

Have you received credit card application forms in the mail promising 0% or very low interest rates for the first 3 months or 6 months? 

Using these offers and making a credit card transfer is a very good way to lower your credit card debt, but you have to be super organized. 

My friend Cam, who is a math wiz, and super organized, does credit card balance transfers on a regular basis.

He carries a balance of say $20,000 at 6% interest available for 6 months, and as soon as the 6 months is up, he transfers his credit card to a new one that offers low interest rates. This way, he carries his debt at a low interest rate consistently. He uses his credit card transfers intelligently and when used correctly as part of a financial plan, credit is a smart tool to attain your objectives. He uses it for financing his business.

For example:

If you have an outstanding balance of $5,000 in credit card A at 18% interest, transfer the total $5,000 to the new 6% interest credit card and save 12% a month in interest.

Your objective is to lower your credit card payment and make them more predictable

Look at the fees: Read the fine print. How long will the lower interest rates last? How much will the interest be once regular rates kick in? 

Don't for get to pay on time

Be organized: If you are not an organized person, don't play around with this method. You will get burned. Credit card companies are doing this to make money, not from the goodness of their heart and not to help you out.