Tips for Transferring a Credit Card Balance

One of the ways to keep ahead of the game with debt is to transfer a balance from one credit card to another.  Be careful with how you do this, however, because it can potentially cost you even more to transfer the balance.  Even if you break even in terms of the amount of interest you're paying, you could end up losing points on your credit rating.  Think about it: you now have two open credit cards instead of one.  This increases your potential of being a credit risk. So don't just rush into transferring a balance without knowing the basics. 

Here are the key points to consider:

1. First and foremost, check the introductory rate for balance transfers. If possible look for a card that has 0% APR on balance transfers for up to 15 months.


2. Check the APR after the introductory rate expires.  You want to keep this under 15% if possible.


3. Get a card with no annual fee--otherwise the savings from a low interest rate could be eaten up by the yearly fee.


4. Determine that you will be able to transfer a sizable balance.  If you've got $15,000 in credit card debt, it's not as though you can transfer the entire debt to a new card with a 0% APR.  You will more than likely only be able to transfer $4000 at a time.

Now that you've got your card, here's the most important point: Leave it alone!  Pay as much as you can afford (while also putting some money into a savings account) and don't use the credit card for new purchases.  Even if it's got a low introductory APR for new purchases, the purpose of this card is to pay down your debt.  Adding new debt to the card is a case of one step forward, two steps back.

While this sounds easy enough, the trouble is that it can be difficult to lock down a decent rate on the card.  After all, if you're deep in debt and need to transfer it, this is likely already dinging your credit rating.  This is why the introductory rate is so important and why you should be as aggressive as possible to pay down the debt when the debt is transferred. 

So what if you pay down that $4,000 and now you've got a card with a 19% APR for the life of the card.  Should you cancel it?  If it's been over a year, canceling a card and opening up a new balance transfer card is not inadvisable.  Just don't cancel the original card.  Your credit rating is based on the length of your credit history, so you want to keep around an older credit card because it shows that you've had experience paying off debt.  If you've been frequently delinquent on that card, just canceling it doesn't cancel out that history, and can actually work against you. 

Piggybacking from one balance transfer card to another isn't the greatest scenario either for your credit rating so you want to avoid this whenever possible.  That said, if you're able to pay down all your debt, this is good news--just be aware that this process can take years to complete if you're in a severe amount of debt.