If you’re thinking about getting a balance transfer card, here are the top five pieces of advice from Reddit that can help you navigate through the process.Before diving right in, it’s important to first understand what a balance transfer is. If you have debt on a credit card with a high-interest rate, you can transfer that balance to another card, usually one with a lower APR and in some cases an initial 0% APR. A balance transfer usually comes with with a transfer fee but could still be great option for those who are dealing with high-interest rates. However, each credit card will have its own fees, terms and conditions and it is important to know about them beforehand.
Calculate the fee chargeable before completing a balance transfer
To give you some perspective, this reddit user explains how being aware of the transfer fee and the intro rate are important before taking a decision to gauge whether the balance transfer will prove to be beneficial.
“Usually, you pay some flat percentage on the amount being transferred upfront (generally 3-5%). Then you pay whatever rate is on the new card. Ideally, this new card would have a 0% intro rate. Make sure this intro rate applies to balance transfers.
Then you have to do the math to see if it's worth it for you.”
Read the terms and conditions of your new account
According to this Reddit user you should read the fine print of your new account in order to ensure you can make your payments in a timely manner and avoid paying even more.
“Do read the fine print, sometimes, if you can't pay it off in those 15 months you can be charged retroactive interest (this is not very common anymore).
I had to get a new transmission for my car, for $4,000. Put it on a credit card, then immediately balance transferred it for 3% ($120) and started paying $350 / month on it. It will be paid off next month having paid no additional interest.”
0% APR on balance transfers doesn’t usually come with 0% APR on new purchases
When you open a new credit card, it often will come with 0% APR for a certain amount of months. This user recommends remembering that new purchases on a balance transfer often do not come with this same benefit.
“If you sign up for a 0% APR on balance transfers for X months, keep in mind that it might not come with 0% APR on new purchases for X months months. So, any additional purchases you make with that new CC will accrue interest and in order to remove the new purchases and avoid paying interest, you'd have to pay off the entire balance.
I'd just focus on getting the best BT CC and if you want to look for other CCs with decent rewards, sign up for them separately.
For example, you wouldn't sign up for a Citi Premier CC with an 80k bonus if you spend $4k in the first 3 months because you wouldn't want to make new purchases on this CC after processing your BT unless you don't mind paying the interest.”
Deferred interest doesn’t always apply to a balance transfer
Understanding payments and interest rates are important when opening a new account for a balance transfer. This user explains the misunderstanding that could occur.
“I was reading a survey from LendingTree where they noted that: 76% of cardholders are misinformed about a key balance transfer benefit. More than 3 in 4 respondents inaccurately believe that if they don’t pay off the entire transferred balance during the reduced-interest introductory period, they’ll be billed for all of the interest they would have otherwise accrued during that time frame.”
You might not always be able to get the amount of credit you need for an entire balance transfer
While a balance transfer is a great option, you might not qualify for a credit card for the entire balance. This may be due to your credit score or other factors. This user offers some advice.
“Just be aware when applying for these credit cards, there is no guarantee that the credit limit they give you will cover ALL your balance. To check, do a search on clearscore or experian, they show if the credit limit will cover your balance I believe.”
If you have credit cards and are interested in reducing your APR to 12% for your existing cards, earning rewards for paying card bills, and no fees, be sure to check out Gauss.