Considering a Credit Card Balance Transfer?

We’re taking a break this week from our BrightDime Basics series for a question that came to us from a BrightDime user about credit card balance transfers. Basically, when should you think about transferring the balance on a card with high interest to a card with lower interest?

You’ve probably been offered, or at least heard of, a balance transfer card. It sounds good; trade your high rate for a lower rate, sometimes as low as 0%! They can be a good tool if you’re using them for the right purpose (paying off your debt aggressively) but they can work against you if you don’t keep their limitations in mind.

The most common balance transfer offers allow you to move the balance from an existing card to a new card that has a significantly lower rate for a fixed period of time (a grace period) but charges you a percentage (usually around 3%) of the balance transferred as a fee. So you could transfer $5,000 from your card with 18% interest to a new card that has 0% interest for one year – but you’d pay $150 (3% of $5,000) to do so.

This works great if you take advantage of that grace period to pay off that debt. It can come back to bite you if you don’t pay attention to all of the details though. Which details? Well… How long is the grace period? What’s the rate on new purchases as opposed to the transferred balance? What’s the transfer fee? Is there an annual fee? What happens if I’m late making a payment? What’s the interest rate once the grace period ends?  

There’s a lot to consider before making a change. Want to know more about balance transfers and get the details on how they work? Read our full article in the BrightDime library. Still not sure if a balance transfer is right for you? Login and chat with a coach about your specific situation.