Credit Card Balance Transfer Offers

January 2, 2018

Dear Consumer Ed:

I keep receiving 0% balance transfer offers in the mail from credit card companies.  I’m carrying a little extra debt right now. How can I determine if it’s a good idea to transfer my existing credit card debt to the 0% card?

Consumer Ed says:

Under some circumstances, a credit card offer that features a low or 0% interest introductory period on debt transferred from another credit card can be an efficient way to overcome a large credit card balance over time without paying much, if any, interest. This could be a good idea for someone who has a high credit card debt with a high interest rate. But there are some things to keep in mind when deciding if this would be a good option for you.

  1. Do you qualify for the advertised interest rate?

    Just because you received a credit card pre-approval offer does not mean that you are approved for those terms. Getting approved for that offer and the proposed interest rate is dependent upon your credit score. Once the creditor retrieves your credit report (and evaluates your income), they may approve you for a less generous balance transfer rate. Typically, to take advantage of those pre-approved offers, you have to have a great credit score.
  1. What is the balance transfer fee?

    Most balance transfer offers have a balance transfer fee, which is typically calculated based on the amount you are transferring. For example, a 3 percent balance transfer fee on a $10,000 credit card balance would work out to a $300 balance transfer fee. So, if the offer does come with a balance transfer fee, make sure that the amount you will save by not paying interest during the promotional period is greater than the balance transfer fee you will have to pay. 
  1. How long is the promotional period and what will the interest rate be after the promotional period ends?

    The benefit of a low or 0 percent interest rate is that you reduce finance charges, which allows more of your payment to go toward reducing the actual credit card balance so you can pay it off sooner. However, once the introductory period is over, the interest rate will automatically jump to a much higher rate, which might be more than the interest you are paying on your current credit card. Before rushing into an offer, consider whether you will be able to pay off the balance before the promotional period expires; if not, you should evaluate whether this deal is still to your advantage.

If you’ve decided that a balance transfer is not the best move right now, asking your credit card issuer for a lower interest rate may be an option for saving money on interest. With a good credit history and your account in good standing, your card issuer may be willing to lower your interest rate a few percentage points.

Submit your own question to Consumer Ed.  Remember…we do not give legal advice. Always consult a lawyer about legal issues.