Advertisement
credit & debt

A Catch to Balance-Transfer Deals

That special low rate credit-card companies offer usually only lasts for a short time, doesn't apply to new charges and sometimes comes with a big fee.

My bank just sent me an offer to transfer balances from my other credit cards to my card from the bank at a 0% rate. I have a $2,800 balance on another card I've been trying to pay off, and I think that this might help. But I'm worried that there might be a catch. Is there?

Advertisement - Article continues below

There's usually a catch when it comes to special credit-card deals. But if you read the fine print, you can still make the most of the low rate -- which can help you climb out of debt.

Balance-transfer offers generally come with an expiration date -- in most cases, the rate jumps after six months or a year. Mark that date on your calendar and pay the entire balance before then. And don't wait until that month's bill arrives to make your last payment, says Scott Bilker, founder of DebtSmart.com and author of Talk Your Way Out of Credit Card Debt. If the offer expires on February 1 but your billing cycle ends on February 20, for example, you'll get charged the interest until the 20th. Instead, pay off the balance the month before the deal ends.

Also, these special rates usually don't apply to new charges or existing balances. Cards usually charge one rate for the transferred balance (0% in your case) but a higher one for previous balances and new purchases. So don't make new charges and pay down any existing balance on that card before you transfer other balances onto it. If your payment doesn't cover your entire balance, it's generally applied first to the lowest-interest portion of your card, then to the higher-interest portion, Bilker says. Say, for example, you have a $2,000 balance transfer at 0% and $1,000 in new purchases at 18%. If you make a $1,500 payment that month, it will be applied toward part of your 0% balance, leaving you to pay 18% interest on your new purchases.

Advertisement
Advertisement - Article continues below

Make sure, too, that the transfer deal doesn't come with big fees. Some levy a 3% fee on the transferred amount, which would cost you $84 on your $2,800 balance. Keep searching for another balance-transfer deal that doesn't include the fee so you'll have more money to pay down your debt. Or call your other credit-card companies and ask for their best balance-transfer deals. If you have a good credit record, you could have several options.

Advertisement

Most Popular

Chiropractor Trying to Get Business the Wrong Way – Illegally
careers

Chiropractor Trying to Get Business the Wrong Way – Illegally

A new chiropractor’s fledgling business plan to attract patients may sound reasonable at first look, but it’s actually against the law, and the same p…
June 30, 2020
What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
13 Luxury Goods That Are Cheaper at Costco
spending

13 Luxury Goods That Are Cheaper at Costco

You could be missing out on huge savings: Costco sells a limited selection of luxury goods at discounted prices, both in-store and online.
June 27, 2020

Recommended

52 Super Deals and Discounts for 2020
spending

52 Super Deals and Discounts for 2020

With a special nod to those of you spending more time at home, we found dozens of deals and discounts, plus ways to save (or make) money.
June 6, 2020
Banks Canceling Credit Cards, Cutting Limits
credit & debt

Banks Canceling Credit Cards, Cutting Limits

If you haven’t used a card in awhile, make a small purchase with it to keep it open. It’s good for your credit score.
June 4, 2020
Milliennials Face Their Second Recession
credit & debt

Milliennials Face Their Second Recession

Forty percent of millennials say the pandemic will likely cause them to delay payments on their debts. Does that include you? Time to take action.
June 4, 2020
When Savings Bonds Make Sense
credit & debt

When Savings Bonds Make Sense

Series I savings bonds are safe options, but don’t go all in.
June 3, 2020