What You Need to Know If You Are Considering a Balance Transfer

One point about credit card transfers that you can scam your self is little known. Say you have a balance of $1000 on a card and you accept an interest free transfer of $10000 to that same card. Then you continue using that card for charges and the next month charge $1000 and on payment day pay off $2000. That payment will go towards The $10000 no interst transfer and you will be charged what ever the card company's regular high interest rate is on the $2000. All payments are applied towards the amounts that bear the lowest interest on your account.

One thing I've always wondered about balance transfers:

If you need some money for several months, is it legal to borrow it from your credit card (cash advance) and then immediately do a balance transfer to another card that offers no interest charges for a few months? And then, after a month or so, balance transfer that to another card? And then after a few months has passed, pay it all off.

I've never done that, but always wondered if that was a helpful strategy to borrow needed money for a few months while paying minimal interest/finance charges.

Thanks for this info.

Another trick is to allocate payments to balances with lower interest rates. So you end up with a huge balance from the transfer & pay interest on new charges until the transfer is paid off.

Another trick is requiring 1 or 2 new charges a month. I don't know the net effect of this one.

In the past, I have found that I can phone the bank which is offering the balance transfer and many times they will agree to WAIVE the fee altogether. This is great! However, I have several credit cards with LOW INTEREST RATES, such as 5.9%, and usually I will stay with those, rather than switching to one with a low initial rate and 9.9% regular rate. I feel that too many balance transfers can affect your credit rating. :(

I am surprised that you did not mention a big problem with no-interest balance transfers. If you continue to use the card for additional charges, none of your payment money goes towards your original balance or the new charges. The no-interest balance must be paid off before you can start paying off the original balance and new charges. That interest can add up over time, and you actually pay interst on the interest each month also.

You can beat the system if you have no balance on the card and make no new charges. If you need it, get another card for new charges.

The only problem is that some of these so called Credit Cards have some built in rules that increase the rate they charge after the transfer is made. If you late on a payment, the interest can go as high as 32%. Just be sure what the hidden terms are before accepting the offer.

I was able to transfer two cards with each holding over $6k in balances and a 21% interest to another card offering $30 transfer fee and 3.99% for the life of the balance. I pay a little more each month for a payment but will be paid off much sooner.

One thing about this, is that if you use the other card (transfered to) normally any payments made are taken off of that low rate amount until it is paid, and therefore any current charges are "rolled over" at the normal higher rate until the low rate is paid off. . .therefore you are still possibly making high interest payments on the new card.

Are there hidden items to look for when offered these "no interest" credit card offers?

In the last nine months we have gotten over 75 transfer aplications, one with zero intrest untill January of 2008. THis does not make sence unless you are signing on to a whole new set of rules. Any insights?

What does it do to my credit rating when I use the balance transfer idea? This is assuming I pay off the card during the 0% time period.

There is a real danger here that was not explained. If you balance transfer $25,000 at 0%, that is great. But if you charge $10 in purchases, at 12% interest, that taints your whole transfer. They will charge you 12% each month on the $25,000, until you pay it off. Your monthly payment of say, $200, goes to pay on the $25,000. It will NOT go to the $10, until you have paid $25,010. You cannot have any purchases on that card, either before the transfer, or after. Its a real game with the cards.

I have been playing this game successfully for years, and never transfer a balance to a card which I use to buy things with. I only use offers with a transfer fee if it is less than the interest I would pay during the promotional period. I usually make another transfer after paying the regular interest for just one month. I usually prefer offers with a fixed rate and no transfer fee, but I never get these from major issuers.