Step slowly onto the balance-transfer
With the economy slowing, lots
of people are looking for ways to lower monthly expenses and free
up more cash.
Transferring a credit card balance to a card
with a lower interest rate can help.
There are plenty of credit
card deals to choose from. But finding a good one takes some
work and quite a bit of close reading. Let's sift through some of
the latest offers.
Call it the big tease. Several major credit
cards are offering rock bottom, introductory rates on balance
transfers. These teaser rates tend to last five to nine months.
The Chase Platinum MasterCard comes with zero-percent
introductory rates on balance transfers for six months, while the
AT&T Universal Card boasts zero-percent introductory rates on
transferred balances for nine months. Discover's Platinum Card offers
the same deal for a year.
You'll need to be an ideal card customer to
enjoy these kinds of low promotional rates. One slip-up is all it
takes for an issuer to jack up interest rates. For example, pay
late once on AT&T Universal Card and the zero interest rate
gets replaced with a 28.49 percent rate.
Other card deals reward you for transferring balances with super-low
introductory rates on any new purchases you make with the card.
With the American Express Blue Card you pay
no interest on new purchases for 15 months. You'll be charged a
fixed annual percentage rate of 9.99 percent, 10.99 percent, 12.99
percent or 14.99 percent (depending on your credit). With Blue,
you also pay a fixed rate of 3.99 percent on balance transfers.
The rate lasts until those balances are paid off.
Other issuers that promise to hold steady on
balance transfer rates include Bank of America. One offer for a
Bank of America Gold Card boasts an 8.9 percent fixed APR on transferred
balances and the same for new purchases for six months.
Keep caution by your
As nice as all these deals seem on the surface, there's plenty to
be wary about. The penalties on these low-rate cards are often severe,
some companies charge a "transaction fee" for the privilege
of transferring a balance to their card.
Several issuers offering low rates on balance
transfer charge fees of 3 to 5 percent when you accept their offer.
A 4 percent fee on a $1,000 balance would cost $40. Some issuers
cap fees at $35 to $75. Most issuers charge these fees as soon as
a balance is transferred onto a card.
Keep your eyes peeled
for transaction fees when weighing different balance transfer offers.
Avoid cards that charge hefty fees.
"It's really very tricky. They have all these
sneaky conditions," says Howard Strong, author of What Every
Credit Card User Needs to Know. "You need to be extremely cautious."
Bringing over your balance
Once you've settled on a card offer, you're ready to start the actual
balance transfer process. This Bankrate.com
worksheet will walk you through the steps.
It's important to continue to make minimum payments
on your old card while waiting for a balance transfer to take effect,
which could take four weeks.
Be sure to close off old credit lines. Otherwise,
you may be tempted to charge away on your old cards. Darrin Sandoval,
director of operations at Consumer
Credit Counseling Service of Greater Denver, sees this all the
"They may transfer a large balance to a card
with a low rate on balance transfers but they continue to use the
old card," Sandoval says. "Soon both cards have large balances on
It's also important to realize that not everyone
qualifies for the rock-bottom interest rate promised in big bold
print. The teeny, tiny print near the end of the credit card offer
"It's the old story. The big print giveth and
the small print taketh away," Strong says.
So even though the offer might say 1.9 percent
interest rate on balance transfers, you may qualify for a 10.99
Getting your transfer's
Let's say you land a super, low-interest
credit card deal and successfully transfer a hefty balance onto
it. And you remember to close off your old credit line. So far,
For the next six months or so, your credit card
payments will be cut in half. With the money you save you may finally
be able to build up a small emergency fund so you'll have some cash
on hand should the worst happen and you lose your job.
As nice as having some breathing room in your
budget may be, you're not done yet.
"That's only the first step," Sandoval says.
The best way to free up more cash for the long
haul is to eliminate credit card debt. You'll need to continue to
pay as much as you can on those credit cards.
You'll also want to adjust your spending habits
to avoid running up huge credit card balances in the future. It's
all a matter of learning to live within your means.
Sandoval advises people to limit credit card
charges to emergencies and for purchases that can be paid off in