Guide To Balance Transfers

Guide To Balance Transfers



Guide to​ Balance Transfers
Are you tired of​ fighting high credit card fees? Why not lower your interest payments by transferring your balance to​ another card .​
Balance transfers are one the smartest and easiest ways to​ reduce credit card costs .​
Just be sure you understand the terms and conditions of​ the new card, so you can maximize your savings.
Before you run out and switch credit cards, consider whether you want to​ keep your current card .​
If you do, simply ask for a​ lower interest rate .​
Tell your credit card company you've found another card with a​ much lower rate and you'll have to​ transfer your balance if​ they can't cut you a​ deal .​
However, be prepared to​ do so if​ they refuse your request .​

Why Use a​ Balance Transfer?
Balance transfers can provide card holders with a​ number of​ advantages .​
Transferring balances to​ a​ lower rate credit card can drastically reduce your interest rate and fees .​
Credit card companies charge varying interest rates on balance transfers and purchases .​
The most common rate is​ 0 percent for six through 12 months.
For example, the Chase Ultimate Rewards MasterCard and Citi Platinum Select MasterCard charge no interest for 12 months on balance transfers and purchases .​
The Discover Platinum Card and the Hess Visa from Chase drop the introductory rate after eight and six months, respectively.
Some cards link the introductory annual percentage rate (APR) to​ billing cycles .​
The GM Card and Fifth Third Bank Cash Rewards MasterCard, respectively, charge 0 percent APR for the first six and four cycles.
Transferring balances can also give you access to​ more perks .​
For example, you may be able to​ get a​ new card that has no annual fee, a​ longer payment grace period or​ cash back on purchases and other rewards .​
Some cards also offer car rental insurance, identity theft protection programs and money saving discounts .​

How to​ Transfer Balances
Credit card companies commonly use low interest rate balance transfers to​ attract new customers .​
There are three main ways to​ transfer the balance on a​ card .​
One way is​ by simply filling out the paperwork provided by your new card issuer .​
Or you can contact the credit card company that you want to​ transfer a​ balance to​ and make arrangements for a​ balance transfer.
You can also shift balances by writing balance transfer or​ convenience checks .​
These simple checks look and act like regular checks .​
You simply write a​ check for the amount of​ the balance transfer and send it​ to​ the company you want to​ transfer a​ balance from .​
Some checks have an​ expiration deadline, so make sure you use them within the appropriate time frame .​
If you don't, you'll be charge the regular interest rate set for your card.
Regardless of​ which transfer method you use, you can only transfer as​ much as​ your credit limit on the card you are transferring allows .​

Transaction Cost and Other Fees
Banks generally treat balance transfers like cash advances and have similar transaction fees .​
There's no fee for balances transferred in​ response to​ special offers .​
But for Citi Platinum Select and many other companies, the transaction fee for balance transfers is​ 3 percent of​ the amount of​ each balance transfer, with a​ $5 minimum and $50 maximum .​
Keep in​ mind that a​ small amount of​ funds may not be worth transferring because the transaction fee may outweigh your potential savings .​
In addition to​ standard transaction costs, banks also charge special fees that can take you by surprise .​
Some of​ the most common special fees include:
Late fees - Some banks wait a​ few days before assessing a​ late fee, but many impose it​ the day after the payment was due .​
Companies either charge a​ flat fee, such as​ $10 or​ $15, or​ a​ percentage, such as​ 5 percent, of​ the minimum payment due .​
To avoid late fees, mail off your payment so it​ arrives in​ plenty of​ time before it's due .​
If you pay your bill at​ the bank's branch or​ ATM, find out how long it​ will take to​ process your payment .​
Sometimes payments made at​ a​ branch or​ ATM aren't credited for a​ few days .​
Over-credit-limit fees - Most cards assess a​ fee if​ you charge more than your credit limit .​
These fees are charged each time you go over your limit, so you could be hit with several of​ them during the same billing period .​
Banks typically charge $10 or​ $15 for this fee or​ up to​ 5 percent of​ the amount you're over your limit .​
These fees are in​ addition to​ interest charges .​
Lost card replacement fees? If your card has been lost or​ stolen more than once and you need a​ new one, some companies will charge you for a​ replacement .​
These fees are range from $5 to​ $10 .​

Making Payments
After you transfer balances, be sure to​ make all your payments in​ full and on time or​ you'll automatically be hit with higher fees .​
Generally, there's no grace period for repaying balance transfers, so interest will accumulate immediately .​
(No interest will actually accumulate if​ you have an​ introductory 0 percent APR.)
When making payments, it's important to​ understand that the payments you make will first be applied to​ balances with lower or​ promotional balances and then allocated toward higher APRs .​
That means you'll be paying down 0 percent balance transfers before you even touch the balance on regular purchases which can be charged at​ a​ rate of​ 9 to​ 18 percent .​
As a​ word of​ advice, consider using a​ different card for your regular purchases and pay off the balance each month .​
Keep your balance transfers restricted to​ a​ separate card .​

After the Promotional Honeymoon Ends
You need to​ keep a​ close eye on the promotional period .​
As soon as​ it​ expires, normal interest rates will apply .​
The standard variable APR for Citi Platinum purchases (8.99 percent) will be applied to​ all remaining purchase and balance transfer amounts .​
Likewise, the standard variable APR for cash advances (19.99 percent) will be applied to​ all remaining cash advance amounts .​
If you default on Citi Platinum's card agreement, the company can immediately increase the APR on all balances including any promotional balances to​ a​ variable default rate of​ 28.99 percent.
Your post-introductory APR will depend on your credit history .​
If this interest rate is​ significantly higher than the rate on your old card and you have a​ remaining balance, you'll wind up losing money .​
Of course, you could always transfer your balance to​ a​ new card with a​ lower promotional rate .​
Just be careful not to​ entangle yourself in​ a​ vicious cycle that could backfire later
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