Transferring credit card balances over to one credit card at a low rate can be very beneficial for you financially. Not only is it a great way to save tons of interest (in some cases, hundreds each month) it is also an effective way of lowering your monthly payments in order to free up some cash flow for other financial obligations. However, as tends to be the case with almost everything credit card related, if not done correctly, transferring balances can end up costing you dearly in the long run.
Avoid Balance Transfer Fees By Having A Check Sent To You
Almost all card issuers these days charge a fee for each balance transfer. If you have multiple balances that you want to transfer over to one card, rather than paying a transfer fee for each one separately, simply have them send a balance transfer made out to you. That way, you can deposit it into your checking account and write out personal checks to pay off your other cards, and you will only be charged one transfer fee.
Do Not Transfer To A Card With An Existing Balance
Credit card issuers enforce what is known in the industry as “payment hierarchy”. What this means is that all payments that you make to your credit card are thrown at the lowest rate balances first while the higher rates continue to accrue interest at the higher rate.
If you have a $100 balance at your purchase APR on the card and then transfer over some balances, you are going to be paying interest on that initial $100 at the higher rate until you have paid off the entire portion of the balance that you have transferred over.
Check all your statements the following month!
Many issuers charge residual interest on your card. This means that they are charging interest every single day. If you call one card company to get your balance, and then transfer that amount over to another card, in many cases you will be charged interest on that balance each day from the day you got the initial payoff quote until the funds actually cleared the bank.
This means that another 7 to 10 days worth of interest charges may rack up, and they are very easy to forget about after you transfer the balances. What’s really nasty is that some issuers can increase your new low balance transfer rate if they see that you missed a payment on another credit card…. don’t let this happen to you!
For an up-to-date list of balance transfer offers, head over to the balance transfer comparison section at CardSense.net
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