How to Save Money With Balance Transfer Credit Cards

Balance transfer credit cards are excellent tools for reducing your credit card debt and saving you money. These cards allow you to transfer your current card balance onto a balance transfer credit card, which charges a low interest rate for a set time period. Doing this will allow you to pay off your balance without accumulating any additional high-interest debt.

In order to take advantage of a balance transfer credit card and ensure you’re also saving money in the process, you should follow these steps:

1. Transfer your current credit balances to the balance transfer credit card.
2. Create a payment plan that’ll allow you to pay off the full balance by the end of the promotional period.
3. Don’t accumulate any additional high-interest debt.

Let’s look at an example of how a balance transfer credit card can save you money. Let’s say, for example, that you’ve accumulated $3,000 in credit card debt on a card that charges 19.99% interest. We’ll assume that you make $60 monthly payments in order to meet a minimum monthly payment of 2% (this may vary between cards). Over the next year you’ll accumulate $588 in interest. If you transfer this balance to a card with a 0% interest rate, you’ll save a total of $588.

Since you have a 0% interest rate on the balance transfer card, the only thing you need to focus on paying off is the $3,000. This amounts to $250 per month. If you stick to this payment plan you’ll carry no balance by the time the promotional period ends. This is necessary if you want to avoid potential spikes in your interest rates.

Some balance transfer credit cards charge a balance transfer fee. Let’s say that in order to transfer the $3,000 to the 0% APR credit card, you’ll be charged a fee of 3%. This will come to a total of $90. Even with the 3% balance transfer fee you’ll still be saving $498.

However, you should be aware that the interest rate on a balance transfer card will jump after the promotional annual interest rate ends. You should view a balance transfer card as an opportunity to pay off your credit card debt within a set time period. You don’t want to still have a high credit card balance after the introductory period ends or you’ll typically be charged higher interest rates once again.