7 Mistakes to Avoid with Credit Card Balance Transfers

Look before you leap into a balance transfer offer that sounds too good to be true.

Don Milne Mar 19, 2019

You’ve seen those offers in the mail or online: “0% Interest on Credit Card Balance Transfers!”

Sounds like a good deal, right? Hopefully yes, but sometimes not so much.

Here are seven mistakes people make when making a credit card balance transfer. Pay special attention to the last two.

Credit card balance transfer mistake #1: Not paying attention to the transfer fee

While the 0% interest is the real deal, there is a cost involved to activate the transfer. It can be as high as 5%, which means if you transfer $1,000, you pay $50. If you found a bank that charged 3%, it would only cost you $30.

Credit card balance transfer mistake #2: Not keeping a good credit score

If you don’t have a good credit score, you may find that banks are not interested in approving a 0% offer. Pay your bills on time and don’t max out your cards to help keep your credit score up.

Credit card balance transfer mistake #3: Transferring the wrong kind of balances

Some credit cards allow you to transfer not only other credit card balances but also car loans, student loans, home equity loans — even small business loans. While it might be tempting to transfer these debts to a lower 0% rate, that is a bad move if the payment term of the original debt is longer than the 0% rate period. This is because there is no guarantee you will be able to get another 0% rate when yours expires. If that happens, you just switched a lower rate debt to a higher normal credit card rate.

Credit card balance transfer mistake #4: Closing your old card right away

If you are done with the old card, by all means stop using it. However, unless it has an annual fee, don’t close the account yet. Part of your credit score is calculated by total outstanding credit card debt divided by your total credit card limit. When you close an account, your credit limit goes down while your balance doesn’t – and this results in lowering your credit score. Also, older credit gives you a higher score than newer credit, so once again, if an old card is removed from your credit report, it could also lower your total score.

Credit card balance transfer mistake #5: Using your new card for new purchases

Many balance transfer offers don’t apply the 0% rate to new purchases. They may apply payments to the balance transfer amount while charging interest on new purchases.

Credit card balance transfer mistake #6: Forgetting to make a payment

The fine print of the 0% interest offer may say that if you miss a payment the 0% interest rate is forfeited and you start paying the normal credit card interest rate.

Credit card balance transfer mistake #7: Spending the interest you save on more spending

A 0% credit card is great way to help you pay down your debts. All of the payments you make each month is going to make your debt shrink faster. But if you only make the minimum payment in order to spend beyond your means, you may find new debt is replacing the old debt you are trying to pay off.

Done right, a credit card balance transfer could save you hundreds of dollars in interest and help you have less debt by the time it expires. Done wrong, you will find any savings was offset by other spending. You may be able to qualify for a credit card balance transfer when you apply for a Zions Bank credit card.

Don Milne is Financial Literacy Manager for Zions Bank.

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