To those who do not know what Balance Transfer(BT) is, I want to explain this as clear as possible.
A balance transfer is an option offered by many credit card issuers for the card holder to use their available credit from one card to pay off the balances due on other cards.
This is just transferring a loan to another loan. Kinda like refinancing your home sort of. It makes financial sense to balance transfer to a lower rate. Many issuers will offer 0% APR for 12 or even 15 months to balance transfer. After the the 0% APR introductory rate, they will revert back to their normal high rate.
Card issuers are not doing this out of the kindness of their heart. It was set up to make money. Period. However, if you know the terms and play by the rules, doing a balance transfer will save you a lot of money.
How To Do A Balance Transfer
Lets take an example of a person who has a $10,000 credit card balance on 17.99% APR. We call him “Tim” for this example. If Tim continue to make his minimum payment, he will end up paying at least $1800 on interest alone per year! Someone with better math can give me the exact number. This is not counting late fee, over the limit fee, all kinda crap fee that credit cards can pour on Tim.
Tim saw a 12 months 0% APR offer in the mail and decided to do a balance transfer. As you can tell, Tim is not a very smart guy. He didn’t read the fine terms and didn’t know anything about Balance Transfer Fee. The card has a 3% BT fee with no maximum. Bam! He is hit with $300 in fee for a $10K BT. Also, Tim decided to go shopping and buy expensive items with his old card now that the balance is 0. He’s incurring more debt and dig himself into a bigger hole. Luckily, Tim stumble upon HustlerMoneyBlog and learn a few tricks below:
The first three cards are business cards. Whether you have a home-based business or that you have sold something on Ebay, you can apply for a business credit card. Just put your name as the business name and your social security number as the tax id. Your business is called sole proprietorship and it’s perfectly legal with the IRS.
If you don’t plan to pay off by the end of the 12 or 15 months balance transfer period, then check out these life time balance transfer rates:
Plan for Balance Transfer
You can request to balance transfer right away on the application or request one over the phone once you get your card. I have successful attempts in the past wherease the CSR waive the balance transfer fee when doing balance transfer over the phone. Simply ask and tell you would like a balance transfer if you do not have to pay the BT fee. YMMV.
Once you have made the balance transfer, it’s very important to not charge up on the balance transfer card. Put the card away and continue to pay the minimum monthly payment. For 0% APR BT, all of your payments during the promo period are going toward principal. A month before the 0% promo period ends, make plan to pay the entire balance off or apply for another 0% APR card to do another balance transfer.
Anything you don’t understand, feel free to comment below.