Guide to Balance Transfers

Why should you be paying high interest on credit cards when you can save by transferring your balance to credit cards with low interest? You can affect balance transfer without much difficulty or fuss. Before you go out and get another credit card read the terms and conditions carefully to see that you are getting a good deal and you get to increase your savings.

  Balance Transfer
          Credit Card
                  Applications

  Click here to read more!
Another alternative for lower credit card charges is to ask your existing credit card company to lower your rate of interest. Let them know you are not averse to shifting to another card company that gives a better interest rate. Today in this competitive environment most credit card companies will accommodate. However, if they don’t, you can always maximize your savings by transferring your balance to a more economical credit card.


Advantages of a Balance Transfer

There are many advantages to credit card holders in balance transfers, the biggest being that you significantly reduce your interest rates and fees. Every credit card company charges different interest rate on balance transfers and purchases. Most credit card companies have 0% for the first six to twelve months.
Examples;
The Discovery Platinum Card has a low introductory offer for the first eight months and the Hess Visa from Chase for the first six months, after which both increase their rates.
The Chase Ultimate Rewards MasterCard and Citi Platinum Select MasterCard charge 0% interest for twelve months on balance transfers and purchases.
The introductory annual percentage rate (APR) is linked to billing cycles by some credit cards companies. 0% APR is charged by GM Card for the first six cycles and by Fifth Third Bank, Cash Rewards MasterCard, for the first four cycles.
There are other perks to transferring balances. There are credit cards with cash back programs and there are some that offer reward points on usage. There are some that charge no annual fee and others that have a longer payment grace period. Some cards offer car rental insurance, identity theft protection programs and discounts to save money.

How to Transfer Balances

Low interest rate balance transfers are charged by the credit card companies. This is done to acquire more customers. There are three main methods to transfer balance on a card.
1) By filling in all the necessary documents required by your new card issuer.
2) By making arrangements for a balance transfer with the credit card company that you want to transfer a balance to.
3) You can transfer the balances to your new card by writing balance transfer or convenience checks. These checks operate like regular checks. You have to write a check for the balance transfer and send it to the new card issuer. Checks usually have an expiry date, so be sure to use them within the time period or else you will be charged the regular interest rate.
Whichever method you use to transfer balances, the amount will be only as much as your credit limit on your card.


Transaction Cost and Other Fees

Balance transfers carry transaction fees similar to the ones charged by banks on cash advances. The fee is waived for balance transfers in response to special offers. It’s not worth transferring small amount of funds because these fees offset any possible savings.
Citi Platinum Select and some other credit card companies charge a transaction fee of 3% of the amount of each balance transfer, keeping a minimum of $5 and Maximum of $50.

Banks also charge special fees over and above the standard transaction cost. Some of the most common special fees include:
Over-credit-limit-fees- Most cards charge fees for each time you exceed your credit limit, which could be several times during one billing period. The credit card companies charge about 5% of the minimum payment due or a flat fee such as $10 or $15 in addition to interest charges.

Late Fees- Banks imposes late fees on payments made after due date, but some wait a few days before doing so. The charge is a flat payment of $10 or $15 or 5% of the minimum payment due. It is advisable to inquire beforehand the time it takes for the bank to process the payment if you are paying it at one of the branches or ATM. The payments made take a few days to get credited so it is safe to mail the check in advance to avoid late fees.

Lost Card Replacement Fees- Cards are sometimes lost or stolen. You will need to ask the company to replace the card. Some companies charge a replacement fee from anywhere between $5 and $10.
.
Making Payments

After transferring the balance, make full and timely payments or you will be charged with high fees. No grace period is given to repay balance transfers, which results in building up interest instantly. If you have received the introductory offer of 0% APR then no interest will accrue.
It is essential to be aware that banks will allocate your payments first towards0% or lower interest transferred balances and then towards higher APRs. Thus none of your higher interest balances will get paid down till your 0% transferred balance is over, and you’ll end up paying interest at 9 to 18 percent on your regular purchases. It is prudent keep your balance transfers to a separate card and a use a different card for regular purchases and pay off the balance on monthly basis.

After the Promotional Offer Ends

Like most good things, the introductory offer of 0% or low interest rates, will also come to an end. As soon as it ends the regular rates will apply.
For example, the standard variable APR of 8.99% will be applied to all balance transfer amounts and remaining purchases, for the usage of Citi Platinum Card. Similarly all the remaining cash advance amounts will be charged the standard variable APR of 19.99%. On non-payment of Citi Platinum’s card agreement the card company can instantly increase the APR an all balances plus any promotional balances to a variable default rate of 28.99%

Your credit history plays an important role in determining your post introductory APR. If you have a remaining balance and the post introductory APR is considerably higher than your old card you’ll end up paying more money and your savings will drop. You can always go back to the old plan of transferring your balance to a low interest card, but this can become a never ending vicious circle that can boomerang on you sometime.