Balance Transfers

What are your thoughts on balance transfers?
I received an offer and am wondering if I should do it. I have to pay off in a year at 0 percent interest. The fee is 3%.
I have excellent credit and also have a high balance on one card that I could benefit from this offer.

Have you done this and were you happy with it or not?

 

I've never seen a credit card application that had an offer to transfer a balance that included a fee along with it, but then I don't think any I've seen came with a year at 0% either.

Otherwise there are usually two things to watch out for:

1) You want to read the fine print. If they are giving you a year at 0% there might be a catch in there, the most common for those kinds of terms being: if you don't pay off the balance within the year then all the interest from the past year that they have been waiving gets applied, all at once.

2) You end up with more credit, and if you aren't good with credit this can be a bad thing. IE: if you had a card with a limit of $5,000 that was maxed out and you do a balance transfer to a brand new card, the new card will probably give you a pretty high limit if they approve the transfer because they want the new card to be able to accept your limit plus give you some room to spend... so they might give you a card with a $10,000 limit. Now you've still got your $5,000 in high interest credit card debt and you have two cards you spend with that have $10,000 in available credit on them.

 

Thank you, I use credit so I am probably not really good with it but I do pay well and have a high Fico score, for what it is worth.
I went back and looked at the information and just to clarify it is not a new card but it is on one of my current cards.
0% promotional APR through 7/1/2015 with either $5 or 3% of the amount of each transaction.

You are correct "when the promotional period ends your APR for these transferred balances will return to your standard APR for balance transfers."

Thanks for your feedback.
I know I can pay it off in the time allotted but I am wondering if I should just keep things the way they are.

 

More than likely, it would be more than advantageous to do the balance transfer and pay the 3%. For example, if you have a $5,000 balance on the other card, it will cost you $150 to transfer. Even if you have a "good" interest rate of 15% on your credit card, you'll pay $5,412 if you pay off the balance in one year. So you would save $262 in interest charges.

Key factor will be to make sure you can pay it off within a year. If you can't, then definitely don't transfer. If you 100% can, it makes sense to transfer.

 

Thanks! I can most definitely pay it off.
I appreciate the help from both of you.

 

I agree... I'm no finance expert, but have used this mechanism in the past and at a 4% transfer fee, so 3%'s even better. Auggie's correct about the fine print... I moved a pretty big balance over with the intent of paying it off in the 18 month, 0% period provided and I left $600 or $700 hangin' out there at the end... my interest calculated was only on that amount and I paid it off over the following 2 months, so it was negligible. I've heard stories of the interest being calculated all the way back to the start, which is a whole 'nother animal.

 

Interesting. Thanks for sharing.
I am so excited.

 

I used to make decent money doing the balance trasnsfer/cash advance thing when interest rates were higher. Back then they'd let you cash those checks in your statement with no fee and no interest for maybe 9 months to a year or more. I'd cash them and put it in my money fund. At my peak I owed maybe 90K and was making 2-3 hundred a month. I'd pay it off before I paid a cent in interest. They wised up and now you cant do that(cant get interest anyway)

But yea, if you can do that and pay it off before the interest kicks in it's a reasonable deal at 3%, if your alternatives are worse, say on a car loan.

 

Nice. This is why we need to be good at math, I am needing strangers to guide me even though it looks like common sense. Thank you all for the great information.

 

Well I didn't just mean that they start charging you the normal interest rate for their card after the year... I meant if you transfer over $4000 and their normal APR is 20% and you let the balance ride the whole year and don't pay any of it (sort of using it like a reprieve from the interest) th en at the end of the year they might slap the whole year's worth of interest on any unpaid balance, in this case a sudden $800+ charge appearing on your card.

 

Wow! I know I can pay it off within my year time. And once I do the transfer I will put the card away and not use it unless it is paid off.

 

Agreed. Just read the fine print, and read it until you fully understand it. I have some promo balance transfers that will jack up the rate if you make a purchase. So read the fine print and decide what is best.

 

Thank you, I will. I almost started the process yesterday and then thought I did not really understand it so I had better wait. Good advice.

 

When we first got married we didn't have a pot to piss in. My husband became the king of the balance transfer promotional offers. Ah, we were so broke stories...who doesn't luv'em? Anyhow, it was a good tool to help us get ahead at the time. Probably not why you'd be doing it but if you got stuck with a large and unexpected expense (repairs and vet bills are my favs) and it's taking you a few months to pay it off it might be something to consider if the interest makes it worth it. It's still a credit check which can impact your overall score which can make a difference in your decision. Some people get very wiggly about credit checks.

 

About a dozen years ago, I had two cards that i ran up pretty hi, doing some work on the house and building a garage. The plan was to either refi or get a equity loan.

But I got an offer from American Express for 2.7 for balance transfers, with no transfer fees. The rate stayed the same till payed.

I read the fine print at least 25 times, the only real catches were, new charges were like eighteen percent, and if I was ever late they could raise the rate to twenty nine percent,

I payed it off in about five years, but saved a bunch compared to a refi.

 

Thanks everyone.