The Ultimate Guide to Credit Card Balance Transfers

0% balance transfer credit cardsI have saved thousands of dollars in interest charges using 0% credit card balance transfers. In fact, I have over $100,000 in available credit on our credit cards from taking advantage of 0% balance transfer offers (by the way, here are some excellent 0% balance transfer credit cards, some with 0% for 18 months). Because you can save so much money with balance transfers, I thought I would share with you this ultimate guide to using 0% balance transfer credit cards.

The Guide to Balance Transfer Credit Cards

  1. Watch the balance transfer fees: Most 0% balance transfer credit cards charge a fee for the balance transfer, although you can find some that don’t. Make sure you read the fine print so that you know what fees you’ll be charged. I’ve seen some balance transfer offers that charge such a high fee that it turns a 0% offer into something more like six or eight percent.
  2. Never use a 0% balance transfer offer to increase the total amount of your debt: I’ve seen some folks transfer debt to a 0% credit card, only to charge up additional debt on their other credit cards.
  3. Have a plan for when the 0% introductory rate expires: Did you ever wonder why credit card companies are willing to offer 0% interest for sometimes as long as a year? The reason is that they know many people will leave the balance on the credit card after the introductory rate expires. Therefore, it is critical that you know what you’ll do with the remaining balance when introductory rate expires. For us, it usually means transferring the balance back to our home equity line of credit that charges a very reasonable and tax-deductible rate. If you plan to leave the balance on the card, check out commandment number 4.
  4. Always know the interest rate you’ll be charged once the 0% introductory rate expires: If you plan to leave the remaining balance on the card after the introductory rate expires, you should know what the adjusted rate will be before transferring the balance in the first place. We currently have 0% introductory rate credit cards that will charge about 7.5% when the introductory rate expires. While we don’t plan to leave the balance on the cards at that time, 7.5% interest would not be the end of the world.
  5. Don’t use 0% offers to overspend: When we recently purchased furniture for our living room, a furniture company offered 0% interest for 12 months. We turned down the offer. I knew that with a 0% offer, we would be inclined to purchase more furniture than we needed. So instead, we paid cash. This goes to another principle that we follow–never borrower to buy consumer goods–but that’s for another article.
  6. Shop around for the best 0% balance transfer option: Not all 0% credit card offers are alike. Some charge different balance transfer fees. And for others, the introductory 0% rate lasts for varying periods of time. I’ve seen some lasts for as short as three months, while others have lasted for 15 months.
  7. Understand the difference between a 0% interest rate on balance transfers and on purchases: Some credit card offer a 0% introductory rate on purchases only, not balance transfers. Other cards offer a 0% rate on both balance transfers and purchases. As you are shopping for the best 0% credit card for your needs, make sure you understand this difference.
  8. Understand how credit card companies apply the payments you make: Credit card companies will apply your payments to the portion of your debt that is subject to the lowest interest rate. For example, if you have a balance transfer of 0% and purchases at 18%, your payments will first be applied to the balance subject to the 0% balance transfer rate. That is why we keep our 0% balance transfer cards separate from credit cards we use on a monthly basis. In fact, I have cut up our 0% balance transfer cards to make sure we don’t accidentally use them for a purchase.
  9. Look for cards that also offer rewards: Several credit cards with 0% introductory rates also offer excellent rewards packages. Depending on whether you travel a lot or want cash back from purchases, you’ll find credit cards that offer a vast array of rewards. But you need to keep in mind that for many of these cards, the balance transfers that you make will not qualify for the reward.
  10. Always remember that even at 0% interest, it’s still debt: While I have taken advantage of 0% credit cards and saved a lot of money as a result, it doesn’t change the fact that we still have debt. Credit cards can be an awfully tempting and destructive privilege, so use even 0% credit cards with care.

Over the past week or so I have spent a fair amount of time researching available 0% balance transfer credit card offers. Most offers typically include a 0% interest rate introductory offer for six to 12 months. I’ve created a 0% balance transfer credit card page listing each of these credit cards, several of which I am using and taking advantage of today.

Published or Updated: June 20, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Dave says:

    Great article.

    The only point I’d add is to consider the implications on a credit score of continuously opening new credit accounts.

    While there may be some advantage of increasing available credit to balance ratios, there would be an impact on the score for each inquiry/new account opened.

    – Dave

  2. stngy1 says:

    Aplying #3 finally dawned on us! We do have a balance on our HELOC, and I missed several months of saving interest by not processing that I could move part of the HELOC balance to such a card knowing I would transfer it back when necessary.
    When I consider arbitage, I now know to run the numbers on a Bankrate calculator to insure I’m not wasting $ or my credit rating. Offers seem to have slowed down and are trickier (at least for us), but even an increase in a credit limit along with a particular offer can be exploited if you run the numbers, etc. and are prepared to act prudently.
    Thanks for the article, and for pulling together all those CC offers!

    • DR says:

      stngy1, thanks for the comment, and my experience is the same in terms of the decrease in the number of offers. I’ve also seen a lot of offers with ridiculous balance transfer fees.

  3. PT says:

    This is a great post. I preach 0% transfers all the time, but have never explained the ins and out. Thx.

  4. Four Pillars says:

    Good article – unfortunately the 0% cc craze didn’t really hit Canada so no opportunity for me.

    Mike

  5. DR says:

    Mike, you could make money not only on the 0% offer through a U.S. card, but also through the exchange rate as the Canadian currency clobbers the dollar. Is that Looney or what?

  6. DR says:

    FYI, this article was published in the Carnival of Personal Finance hosted by Being Frugal. Check it out!

  7. kentuckyliz says:

    I pay 0% even without a special offer…because I am DEBT FREE!

    • DR says:

      kentuckyliz, nice!

  8. Jim says:

    http://www.doughroller.net/2008/03/14/0-balance-transfer-credit-cards-the-10-commandments-of-responsible-borrowing/

    Excellent webpage! Have it a thumbs up with stumble and I Digged It too! Very informative and helpful about credit!

    On that same subject Iíd want to tell everyone about a company called Credit Assistance Network (in Florida) that helped me improve my credit scores. They were great! They didnít remove everything negative but they did remove most of it. Even more importantly they gave me excellent advice to help me build my credit scores.

    The website is http://www.creditagenda.com or http://www.expert-credit-advice.com

    They did such a great job that I promised them I would tell everyone about them. Tell them Jim from Ohio recommended them!

  9. credit card for fair credit says:

    First of all, how it works is basically any kind of car service you perform on your registered vehicle on the card, as long as you fill out a form and send in your receipts (which you’ll never get back), they will credit you for the full amount sans tax. Basically, free car service. In my case, I got an oil change and it came out to be 53. xx with tax included. For some reason, i thought they would only refund a certain percentage but apparently they refund you the whole amount and I cannot find any sort of…

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