How to Maximize the Benefits of Balance Transfer Cards

Credit cards with a 0% or low-interest introductory rate can be great financial tools. To get the most out of them, be sure you understand the terms and conditions of the offer in detail. Here are some things you need to know to get the most out of your 0% balance transfer card.

When Does the Introductory Rate Expire? Find out exactly when in the billing cycle the promotional rate expires. For example, if the rate expires in the beginning of June and your billing cycle goes till the end of the month, you need to pay off the balance in full when you get your May statement to avoid high interest rates.

You can find the details of when the introductory rate expires in your card agreement, or simply call a customer service representative to ask.

What Is the Balance Transfer Fee? Many cards charge a 3% to 5% transaction fee for balance transfers, typically capped at $50 or $75. If you make multiple balance transfers, the transaction fees can quickly undermine your savings. The best way to take advantage of a balance transfer offer is to make only one transfer.

What about Convenience Checks? Convenience checks can be a simple and easy way to make a balance transfer or give your bank account a cash infusion. However, the terms of the offer may be different from balance transfers made by phone, so read the fine print carefully. Similarly, if you use a convenience check for a purchase instead of a balance transfer, make sure that the low rate applies to purchases as well, or you could end up paying a high cash advance rate on your purchases.

What Triggers Higher Rates? Low-interest balance transfer offers reward good financial discipline. If you default on the credit card agreement, it may trigger higher rates. Even one late payment can be sufficient to jack up a 0% APR offer to, for example, a 28.99% default rate.

Read the terms of the offer to determine what would cause you to default on the card agreement, or call a customer service representative to ask.

Some of the most common higher-rate triggers are:

1. Failing to pay the minimum payment by the due date and time
2. Exceeding the credit limit on the account
3. Failing to have a check with your payment honored by your bank
4. Failing to make payments to another creditor on time, if the record of this shows up on your credit report.

How to Not Get Trapped with Higher-Interest Balances: Credit card companies apply payments to balances with a lower APR before balances with higher rates. So when you use a card to make a low-interest balance transfer, pay off any outstanding balances before making balance transfers and use another credit card for new charges. Otherwise you will end up with a balance accumulating interest at standard rates, which could be 19.99% or higher, in addition to the balance with the low-rate interest.

Published: May 22, 2009