Credit Card Transfers – What You Must Know

Some people reeling from credit card debt see a credit card transfer as a way to relieve the stress of debt. While this may actually be true in a number of cases, much depends on how wisely you choose the transfer and how responsibly you follow up once the transfer is made.

Credit card companies are making a large fortune from the interest rates or finance charges they apply to your credit card, with the average today hovering around 16%. If you’re only paying the minimum amount due, which is what they hope you’ll do, it will take years to pay off the balance on just one credit card. American families average a total of eight credit cards.

Consider this; $1,000 worth of credit card charges at the current interest rate will take you 22 years to pay off if you pay only the minimum amount required and you’ll pay $2,300 in interest charges alone. With the numbers working against you in this way, it’s little wonder so many find the idea of credit card transfers so appealing.

If you choose to transfer a high interest balance to a lower or 0% interest card, there are a few things you need to know that will help make it a winning situation for you, instead of pouring grease on a fire.

Your reason should be to get out of debt, not just postpone paying off your debt. Shop around to find the credit card offer that will give you longest length of time at the reduced interest rate. Be prepared to pay the balance off in that time or you could wind up paying as much interest as before, even more in some cases.

Be aware there are usually transfer fees charged by the ‘new’ creditor. This can be a percentage of the amount you’re transferring or a flat rate, depending on the institution. Make sure you’re not blindsided by unexpected annual fees. The best way to be sure that doesn’t happen is to read every word, including (especially!) the fine print.

Don’t close out your old accounts once the transfer has been made. Just stop using them. Closing your old accounts lowers the age of your credit history, which makes up 15% of the total credit score. It will also lower your debt to credit ratio, which makes up 30% of your total credit score.

Transferring credit card balances can increase your credit score by making it appear that you owe less because now your credit report shows some empty credit cards. If you can continue paying down what you owe, and doing credit card transfers as necessary to get the total amount you owe below 30% of what you can borrow, it will do wonders to increase your credit score and your overall credit ‘worthiness.’

You can transfer credit cards once every six months without negatively impacting your credit score; any more often than that could reflect badly on your credit report. The most important thing to remember is that once you’ve made a credit card transfer, your ultimate goal should still be to get the balance paid off!