Credit Card Balance Transfers -
Managing Credit Card Debt

See Also Other Pages In This Section:

How To Negotiate Credit Card Settlement

Credit Card Home Page

Playing The System - How To Be A Credit Card Tart

Can You Be Sued For Credit Card Debts

Credit card Balance Transfers - What Is A Balance Transfer?

A balance transfer is when you move your credit card debt from one credit card to another one. The new card pays off the old one for you, and your debt is then transferred to the new card company.

You can usually do this as part of the application for a new card. There is generally a section where you are asked if you wish to transfer debts from another card. Failing that, you just phone them up when you have your new card and do it that way. You usually only have this option within the first few weeks of getting a new card.

Credit Card Balance Transfers - Why Do It?

The reason for carrying out a balance transfer is to switch your debt to a card that charges you less interest. The higher the interest rate you are being charged, the longer you will take to pay off your debts and the more it will cost you. By regularly carrying out a balance transfer, you can ensure that you keep your interest rates low, or even at 0%.

Credit Card Balance Transfers - Does It Cost Anything?

There used to be quite a few cards that would let you transfer your balance to them without any additional fees, but these have all but gone now. Card companies will normally charge a 'balance transfer fee', which you can expect to be about 2-3 % of the amount you transfer.

You need to build this fee into your calculations. Work out what the fee will come to, and then calculate what you will save in interest over the period you expect to stay with that card. It is only worthwhile if you are still going to be better off after paying the fee.

Credit Card Balance Transfers - Reduce Your Interest - But Not Your Payments

If you use a balance transfer to switch to a credit card with a lower interest rate, you should still be aiming to pay off as much as you can each month. The minimum payment could go up or down, as this is nothing to do with interest rates, but you should never settle for just the minimum payment anyway. Your main aim should be to pay as much as you can each month, because you are charged interest on whatever is left unpaid.

You need to pay the balance off as quickly as possible. The saving you make by doing a balance transfer is in the fact that a smaller proportion of your payments will be going towards interest charges, so you will pay off your debt faster, and pay less in the long run.

Credit Card Balance Transfers - If You Have A Poor Credit Rating

If you do not have a good Credit Rating, chances are you will be refused a balance transfer. Getting a balance transfer in such circumstances may not be impossible, but your options are a bit more limited. There is a facility on MoneySupermarket.com that lets you do searches for cards aimed at people with poor credit ratings. As you will find out if you read the Credit Rating section, you shouldn't do more credit searches than necessary as these can impact on your actual rating, so you should avoid repeatedly applying for cards you are unlikely to get.

Credit Card Balance Transfers - Don't Mix Balance Transfers and Spending

When you use a card offering a good deal to do a balance transfer, you should never use that card for purchases. Get another card with the lowest interest rate you can find for purchases, and use that instead. The reason for this is that credit cards rarely offer special rates for both spending and balance transfers, and cards with good balance transfer rates often have much higher rates for purchases.

This is further complicated by the likelihood that if you do spend on the card you have for balance transfers, the terms may well mean that none of your monthly payments will go towards paying off any of the high interest purchases until all the low rate balance transfer debt has been cleared.

Credit Card Balance Transfers - One Step From Being A Tart

If you can clear your debts in six months to a year, you probably only need to transfer your balance to a new card once. If you need longer than that to repay, you are going to have to keep transferring the balance to new cards. This has become known as 'tarting' which you can find out more about on the Credit Card Tart page.

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