Hidden Facts About Balance Transfers

Consolidating multiple debts—such as a car loan and a store credit card balance—onto one low-interest credit card with a single payment can actually save you money. This kind of consolidation is known as a balance transfer. Instead of paying interest on, say, three different loans, you will only pay interest on one.
However, not all balance transfer offers are created equal. Make sure you research the terms, including the fine print, of each card thoroughly and then compare them side-by-side—try using a site like CreditCards.com. Here are the terms you should consider:

Introductory interest rate 

The average is around 3%, but there are many great offers that may start you at 0%.

The length of the introductory offer 

Many offers lure you in with a low introductory rate and then raise it after a short period of time. To get the most benefit, make a plan to pay off your balance before the higher interest rate kicks in, and stick to it.

Balance transfer fee 

Again, the average fee is 3% of the amount you are transferring. But there are options that don’t charge a transfer fee at all. Bonus: some balance transfer options, like Mountain America Credit Union’s current promotion, actually pay you 3% cash back!

Interest rates for new purchases 

You’ll want to confirm if your introductory interest rate applies to new purchases as well as to the amount transferred since new purchases are often subject to a much higher rate.

Credit limit 

Like most credit cards, you’ll more than likely have a credit limit. If your debt exceeds this limit, carefully consider the bills you choose to consolidate. Start with the debt that has the highest interest rate and go from there.

Monthly payment minimum

The goal of the balance transfer card is to pay off the debt, not postpone it. Develop a plan to pay off the debt before the interest rate goes up and stick to the plan. Try to pay more than just the minimum payment and always pay on time—some offers will only honor the introductory rate as long as payments are made by the due date. Make sure to read the fine print! 

“A balance transfer card can be an excellent way to pay down debt, as long as you keep yourself on budget,” says Jade Beckman, vice president consumer loans at Mountain America Credit Union. “Use our calculator tool to estimate how much you can save.” 

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