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A credit card balance transfer allows you to move your unpaid balance from one credit card to a new card that offers a lower interest rate.  This means that you pay off your current credit card with a new credit card and continue making payments on the amount you owe, but with less interest.

Over the long run, this can end up saving you a lot of money, especially if you ask the right questions when choosing your new card.

Is there a transfer fee?

When choosing a new card for your balance transfer, find out if you will be charged a fee to move the money. This amount is typically a percentage of the total balance you are moving over from your current card. For example, if your balance is $8,000 and you are charged a transfer fee of 3%, the move will cost you $240. High transfer fees could cancel out any savings benefits. Look for cards with no up-front fee on transfers to get the best bang for your buck.


Is there an introductory or promotional rate?

Many card issuers offer introductory rates of 0% APR on your transferred balances. This allows you to pay off or put a large dent in your debt by focusing the full amount of your monthly payment to the balance. Introductory rate periods will vary so know how much time you have before the interest rate will go up. Any amount remaining on your balance will begin accruing interest after the introductory period is over.


What is the long-term interest rate?

Any relief you feel after your credit card balance transfer will be quickly erased if you continue to charge purchases on the new card. Many 0% interest transfer deals only apply to the balances you move over from other cards and any new debt is charged interest at the regular rate listed in your purchase agreement. Also, if you aren’t able to pay off your transferred balance by the end of the introductory period, you’ll begin accruing interest at this higher rate.


Can I pay off my balance before the introductory rate expires?

Your goal in transferring your credit card balance is to pay off your debt at a lower interest rate. If you are able to qualify for a card with a 0% APR promotion on transferred balances, take advantage of the deal and make a plan of action to owe nothing on the card when the promo period is up.


What should I do with my old credit cards?

After completing a credit card balance transfer, it might be tempting to close out the old account. If your old card carries an annual fee or you don’t trust yourself to stop using it, closing the account is a good option. However, because “Length of Credit History” is one factor in your credit score, having longevity to your open lines of credit can help boost your overall score. If the card doesn’t have any fees attached to it and you can maintain a zero-balance on the card, then keep the account open.


Doing your homework before completing a credit card balance transfer can help you make a smart choice with your money and put you on the road to lowering your debt load.