July 6, 2013 — -- Credit card balance transfers can be an invaluable tool for managing credit card debt. This tactic allows cardholders to move their debt from a card with a high interest rate to one with a lower interest rate, or no interest charges at all.
While it's not inherently complex to transfer a credit card balance, there are still several important things that cardholders need to be aware of before, during, and after.
Before You Transfer a Credit Card Balance
1. Make sure you keep up with all of your payments. This will allow you to maintain excellent credit and find a balance transfer offer with the best possible terms. The right card may be one you already have with a lower interest rate than the one you are using, or it may be a new card with a 0% APR promotional balance transfer offer. In fact, you may be able to get a promotional financing offer from one of your existing accounts, possibly in the form of a convenience check.
2. Understand all of the terms and conditions of the balance transfer. Know what the card's credit limit is, its interest rate on balance transfers, and what the balance transfer fee will be. Balance transfer fees are typically 3 percent of the amount transferred, but not always. Chase Slate currently has the only 0 percent APR promotional balance transfer offer with no balance transfer fee, although others can have fees as high as 5 percent.
In the case of promotional financing offers, learn how long you have to complete a qualifying transfer, and the length of the promotional financing period. Typically, promotional balance transfer offers must be completed within 30 days to four months of the account opening, and can last from between six and 18 months. Keep in mind that even though the terms might not explicitly say so, banks will not allow balance transfers between their own accounts.
3. Make a plan. Come up with a sound financial plan for paying down your debt, otherwise your balance transfer is just another form of postponing your obligations.
Making the Transfer
Contact the bank that you are transferring the balance to and ask to perform a balance transfer. Be prepared to give the account information for the other card, and the total amount you want transferred.
After the Transfer
Continue to make at least the minimum payment required from the old credit card, and if you have paid your entire debt, make sure to get a statement from your bank. However, keep your old account open in order to maintain a low credit utilization ratio, which will help your credit score.
Most importantly, stick to the plan that you created to reduce your debt. Recognize that it probably will not be possible to take advantage of promotional financing offers over and over again.
By understanding some of the nuances of balance transfers, cardholders can use these offers to save as much money as possible on their credit card interest charges.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.