Are fees involved?

You typically need to pay a fee to get the 0 percent APR balance transfer deal. Fees are usually 3 percent of the balance, but they could be as much as 5 percent. You might be able to get a card that offers 0 percent APR with no fees, but that’s rare. For example, at the time of this writing, only one card offered that deal, the Chase Slate card. If you are transferring a large sum, such as $10,000, and the fee is 5 percent, you’ll pay $500 to transfer the money. You would need to save more than $500 on interest payments, or you lose on the deal. If the fee is 3 percent, you would pay $300. Most people save if they pay the balance off during the introductory period, even with a 3 or 5 percent fee.

How long does the deal last?

Many credit card issuers offer 0 percent APR deals for 12, 15 or 18 months. The shortest introductory periods last 6 to 9 months. After this introductory period ends, you will be charged interest on any balance you have left on the card. It’s important to know what the interest rate will be when the introductory period ends if you think you won’t pay the card off during the introductory period. However, you might not know the exact figure; the credit card issuer might post the interest rate as a range, which typically depends on your credit score.

Should I use the card during the introductory period?

You can use your credit card balance transfer card for new charges during the introductory period as long as you have available credit. If you know that you can use the card and still pay off the balance during the introductory period, this might work well for you. But, be careful that you don’t charge more than you can afford. When the introductory period ends, you could wind up in a worse position than you were in before the balance transfer, depending on what your new APR is. You also need to read the terms of your balance transfer card. Sometimes the low introductory APR offer applies only to the balance transfer and not for new purchases.

Can I extend the introductory period?

When you talk to a credit card issuer, you can always try to negotiate terms, such as extending the introductory period or lowering the fee. There is a chance to get terms that are more favorable, but the credit card issuer is under no obligation to change the terms it offers. Your best bet is to shop around. Compare the balance transfer cards on the market, and choose the one that offers the terms that are most important to you.

What else should I know?

If you miss a payment on a credit card balance transfer card, your 0 percent APR could end immediately. Your card issuer might replace it with a penalty interest rate that could be higher than your old card’s rate was. Penalty rates are often extremely high, such as 28 percent APR. You need to read the terms of the card offer to know what happens if you miss a payment or are late.

Balance Transfer vs. Cash Advance

You first need to make sure you are using a balance transfer check instead of a cash advance check with this particular type of credit card balance transfer offer. Although the checks look alike, they are for very different needs and come with different terms. Tip: balance transfer terms are more favorable.

Usage

People generally use cash advance checks when they need immediate cash. Using one of these checks is similar to taking out a payday loan: you pay a lot of money for getting fast cash. People use balance transfer checks to transfer credit card debt they have on a high-interest credit card to a card with terms that are more favorable.

Cash Advance Terms

Cash advance checks usually come with a higher interest rate than what you are already paying on your credit card, and the interest starts accruing from the day you take out the cash advance. This differs from when you use your credit card. In that case, you get a month’s grace period before interest starts accumulating. In addition, your credit card issuer might charge you an upfront fee, usually a certain percentage of the amount of the check you write. Cash advance checks are not about getting you a better deal; they are about providing emergency cash.

Balance Transfer Check Terms

Balance transfer checks are different. They offer better terms than your old card so that you will transfer the balance. It’s important to check the balance transfer check terms to ensure you will be getting a better deal. There are typically fees involved when you use a balance transfer check that could be 3 percent to 5 percent of the transfer amount. The interest rate, however, should be significantly lower for a certain introductory period, such as 12 months. The interest rate on some balance transfer checks could be as low as 0 percent APR for a limited time, which would be no shorter than 6 months and could be up to 18 months, occasionally even longer.

Balance Transfer Check vs. Shopping Around

Credit card balance transfer offers, such as balance transfer checks, provide convenience. You simply need to use them. But you might not be getting the best deal out there. For that, you need to shop around. Credit card issuers usually offer better deals to new customers in the hopes of landing a new, loyal customer. If you are already a customer, you might get a good deal offer, but it might not be the best deal out there. Search the balance transfer credit cards on offer if you have the time to ensure you get the best deal.

Mortgage or HELOC

Even if you have a low interest rate on your mortgage or HELOC, it probably isn’t 0 percent APR, which is what many balance transfer cards offer. So it’s natural to consider moving all or some of your mortgage or HELOC to a 0 APR balance transfer card. But transferring a mortgage or HELOC to plastic is risky, so you need to carefully consider all the ramifications.

1. Higher interest rate could kick in — The 0 APR balance transfer is just an introductory rate. After a certain period, usually between 6 and 18 months, this rate ends and a higher interest rate kicks in. The higher rate will likely be more than your current mortgage or HELOC interest rate.

 

1. You lose the mortgage tax deduction — Once you turn your mortgage or HELOC into credit card debt, you no longer get the tax deduction.

 

1. How to decide — If you are 100 percent sure that you can pay off the transfer balance before the introductory period ends, you might want to consider using a 0 percent APR balance card to pay some or all your mortgage balance or HELOC. Ask yourself whether you can stick with your payment plan even if you lost your job or were in an accident. If the answer is “no,” then you probably should not take the risk.

Furniture Loans

If you have a 0 percent APR furniture loan from a retail store, you might want to switch your balance to a 0 percent APR balance transfer card if the terms were right.

1. Harsh penalties — Typically, if you miss or are late with a payment when you use a 0 percent APR furniture store card, you lose the 0 percent deal right away, and you will then start paying interest. But the kicker is that you pay interest going back in time to the original purchase.

 

1. Not as risky — If you miss or are late with a payment using a 0 percent APR balance transfer card, interest will still kick in at that point, but only going forward, not retroactively as the store credit card typically would.

 

1. Consider balance transfer fees — You might have to pay a balance transfer fee to move your balance from the furniture store card to the balance transfer card. In that case, it might not be worth it.

How It Works : Credit Card Balance Transfer Rules

After you researched the various credit card deals available, picked the best one for you, applied for the card and received approval for a balance transfer card, you are ready to begin. Simply contact the credit card issuer you are transferring your balance to and say that you want to make a balance transfer. You’ll need to give your old account information to the new card issuer and state how much you want to transfer.

How Long It Takes

It can take between 3 and 10 days for the transfer to post, sometimes as much as 30 days. Meanwhile, make sure you are still making at least the minimum payment on your old card. You need to continue to make payments on your old card until you receive confirmation that your old card issuer received the transfer payment from your new card issuer.

Methods for Transferring Your Balance

You can request a balance transfer online, over the phone or by using balance transfer checks.

• Transferring your balance online — You can verify for yourself that all the information, such as your personal information and your account numbers, is correct.
• Speaking with a customer service representative over the phone — This is a good way to transfer your balance. However, there is a chance that the representative might mistype some of your information, which would add to the processing time if that happened.
• Balance transfer check — You might receive a balance transfer check in the mail because you have a credit card. You can use this check to pay off a balance you might have on another credit card. The big advantage to balance transfer checks is the convenience. In fact, many people call them “convenience checks.” However, don’t confuse them with cash advance checks, which are typically what the term “convenience check” is for. Cash advance checks usually have a high interest rate, and balance transfer checks usually have a low interest rate.

Using the Old Card

Once your new credit card issuer pays the transfer payment, it’s not a good idea to start using the old card again just because you have new available credit opened. You might wind up in a debt situation that you can’t handle. After all, you haven’t gotten rid of the transfer amount; you just transferred it to a different card.

However, you should keep the old card open (unless you can’t trust yourself not to overspend on it). If you keep it open and don’t use it or use it only for small purchases, such as gas, which you can pay off in full each month, your credit score will rise. You will have available credit that you are not using. Credit utilization is the second biggest factor the credit bureaus use when figuring your credit score. (Paying your bills on time is the biggest factor.)

Rewards Cards

The best way to use a rewards credit card to get the most benefit from it is to pay the balance at the end of each month. That way, you pay no interest and can reap the full benefits the rewards balance transfer credit card offers. Paying interest on the credit card negates some or all the benefits you might receive. For example, if you spend $20,000 over the course of a year with a cash back rewards card that offers you 1 percent cash back on purchases, you earn $200 at the end of the year. But if you were paying interest on credit card debt each month, you can easily pay more than $200 at the end of the year.

Balance Transfer

If you do carry a balance and want to make the most of a rewards card, look for one that offers 0 percent APR on balance transfers along with 0 percent APR on all your purchases. Those terms won’t last forever, though; deals last for only an introductory period. The longer the introductory period the better, so look for a card that offers the introductory rate in the 14- to 18-month range.

A Good Deal

The Discover it Card, at the time of this writing, offered a great deal: 0 percent APR on balance transfers for 18 months and 0 percent APR on new purchases for 6 months. The APR changes to a variable rate between 10.99 percent and 22.99 percent after the introductory period.

If You Travel

Travel rewards cards typically offer some of the best rewards points deals, according to the Travel Channel. The Miles & More World MasterCard lets you earn 10,000 award miles with a balance transfer and 15,000 award miles with your first purchase. It offers a 0 percent APR on purchases and balance transfers for 12 months. You must pay a $59 annual fee for this card and a 3 percent balance transfer fee.

Best Way to Combine Balance Transfer with Rewards

The best way to combine a balance transfer card with a rewards card would be to divide the balance transfer amount by the introductory period. (With the Discover it Card example, the figure would be 18.) Then you can determine what your monthly payments need to be to pay the balance off before the higher interest rate kicks in. Once you pay off your balance, continue to pay it off for new purchases each month. That way, it shouldn’t matter to you what the interest rate becomes after the introductory period because you won’t be paying interest, but you will still earn rewards points that could go toward restaurants, movies, furniture, gas, groceries, airline tickets or cash.

Your Credit Score

You typically need a good credit score to get a card that offers the best deals. The lowest credit score you can have to qualify for the Discover it Card, for example, is 702, according to Credit Karma. The way to get a good credit score is to pay your bills on time and to use only a small portion of the credit that is available to you, typically no more than 30 percent. Consider this when making a balance transfer because balance transfers lower credit scores sometimes if the transfer raises your credit utilization score too much. It might take you some time to raise your credit score, but once you do and once you pay off your credit card debt, you can have credit cards working for you.

A Final Note on Rewards Cards

All rewards cards have different requirements. Here’s what to look for when comparing features:

• Earning restrictions

• Redemption restrictions

• Expiration dates

Introductory Rates

Credit card issuers, to get your business, typically offer attractive promotional deals to get you to transfer your credit card balances to their card. Promotional deals usually consist of 0 percent annual percentage rate for six months, a year or even 18 months. This allows you to apply money you normally spend on interest payments to your balance instead. For example, if you owe the national average of $7,000 in credit card debt that you want to pay off in 18 months and you pay 12.5 percent APR, you would actually pay $7,713.04. If you transferred that balance to a card with 0 percent APR, you would save 713.04.

APR

Ideally, you would pay the balance off during the introductory period. But, if you can’t do that, you should pay attention to what the APR becomes when the introductory period ends. If the APR on the balance transfer card will be greater than what you are already paying in interest, that card might not be the best deal for you if you expect to carry a balance for a long time.

Fees

You also need to consider fees. You are often charged a fee when you do a credit card balance transfer, often about 3 percent of the balance transfer, so if your balance were $7,000, you would be charged a $210 fee. If you think you won’t pay the balance off during the introductory period where you pay 0 percent or a low percent APR, you then might be paying interest on the fee you were charged in addition to the leftover balance. In that case, the balance transfer card might not be a good deal for you.

When to Apply

Apply for a balance transfer card if you decide that the numbers work in your favor. Keep in mind, however, that you still need to qualify. You typically need a decent credit score to qualify for the card, and you might need a FICO score above 700 to get the best introductory rates.

More Information You Should Know

If you picked a card and were then successful in obtaining it, there is even more you need to know. For example, your balance doesn’t automatically transfer to the new card. The time it takes varies. While you are waiting, make sure you don’t miss any payments on your current credit cards. You can hurt your credit score if you do. You also need to understand what balance transfer checks are, what people often use their balance transfers toward and whether you qualify for rewards cards perks. You can learn about all these issues on this website.

Food for Thought

A credit card balance transfer could be the best option for you. But, before you decide, you need to learn the ins and outs of these cards. After all, you want to put yourself in a better situation if you use one, and that requires some understanding of how these cards work. Armed with the right information, you should be well on your way to controlling your credit card debt instead of having it control you.