Here is my 2020 resolution. None of my readers will be paying interest on their credit card bills anymore! There are so many options out there on how to consolidate the debt for lower or even no interest. Yet there are so many people who just sit and pay interest without even noticing that this is costing them $1,000’s of dollars a year! In the next few weeks, I plan on posting a few posts discussing the options of what can be done.

In this post, we will discuss the most famous and basic option: Balance Transfers.

How Can A Balance Transfer Help?

There are many credit card issuers which offer, what is called, an intro 0% APR period. As an incentive for you to transfer your existing balance to the new card, the credit card issuer will offer you an intro 0% APR period for as much as 21 months! You will be paying ZERO percent interest for the entire 21 months!

Check out a comprehensive list of offers available now! Here

Why Do Banks Offer It?

Very simple. Banks want your debt, because you will eventually pay a lot of interest on your credit card debit. About 25% APR! The bank wants you to transfer the balance to them because they hope that once the 21 or so months are up, then they will become rich on you.

But just because the banks want to take advantage of you, that does not mean you have to be a fool and let them. You can do the following. After the 21 months are up, just pick up another 0% APR offer from a different bank, and bingo, you will get another 21 or so months interest-free!

For Whom Will A Balance Transfer Be Helpful?

In order for you to get approved for a decent limit on the new intro 0% APR credit card, you will need to have good credit. If you’re maxed out on more than 3 credit cards, then usually new issuers will not approve you for a new credit card. Even if they do, you’ll only get approved for a very low credit limit. If that is your case, a balance transfer might not be your best solution.

Keep in mind, though, that you can transfer a balance from your name to your spouse’s. If you’re the one that is maxed out, but your spouse’s credit is clean, then you can go ahead and have your spouse apply for the new credit cards and then transfer the balances to your spouse’s new accounts.

If you are only maxed out on less than three credit cards, then you can still try to get approved for new credit cards. In my experience, I found that Citi, Capital One, and Bank Of America to be the most lenient on approving applicants with existing maxed out balances.

Again, you can check out the full list of intro 0% APR credit card offers here.

(If your spouse is maxed out or if you do not have a spouse or partner then stay tuned for a follow-up post with some more creative suggestions).

What You Need to Know Before Making a Balance Transfer

Here is what you need to know before making a balance transfer.

Penalty APR

Penalty APR is the APR you will be paying if you make a late payment. Before making a balance transfer, make sure you are familiar with how much the penalty APR will be. If you will end up being late (it happens to the best of us), not only will you be losing the intro 0% APR offer, but you may end up paying more interest now than what you were paying before you made the balance transfer.

Grace Period

When you make a purchase on a credit card, (as long as you pay your balance in full every month,) you will not have to pay interest on new purchases until after the due date on your statement. When you make a balance transfer, you will not be paying the balance in full by the first month. Remember that you will lose your grace period and end up paying interest on your new purchases from the date of the purchases. (I recommend not making any new purchases on this card rather use a different card and pay it in full every month.)

Minimum Payment

Before making a balance transfer you will want to make sure that you will be able to afford the minimum payment amount. Therefore, make sure you are familiar with how the minimum payment is calculated on your new credit card. (You can find a list here.)

You Can’t Transfer a Balance From the Same Bank

Banks do not allow you to transfer balances from one card to another credit card issued by their bank. For example, you can’t transfer a balance from one Chase credit card to another Chase credit card.

Balance Transfer Fee

Always check what the fee will be to transfer the balance. For example, on the Amex Everyday card, there is no fee to transfer a balance and you get an introductory 0% APR period for 15 months, but with the Citi Simplicity card there is a 5% fee to transfer a balance but you get an introductory 0% APR  period for 21 months! Which one is better?!?! I’ll let you decide…..

How Do I Make A Balance Transfer?

Once you’re approved for the new credit card with the intro 0% APR period, all you have to do is call the bank (or sometimes there is a balance transfer option available online as well). Tell the representative that you would like to make a balance transfer. The representative will ask you for your previous credit card issuer name and account number. They will then go ahead and read a quick disclosure, then submit the balance transfer request. Once the request is submitted, the bank will reach out to your previous credit card issuer and submit a payment for you and pay up the balance. It will take about 7-10 days until the balance will be cleared from the previous account and show up on the new account. Once the balance shows up on the new account, whoa! You just saved up to 21 months of paying as much as 24.99% interest!

Doing Multiple Balance Transfers

Credit card issuers that you have existing accounts with, often check your credit file for negative changes (soft pull) and receive alerts from the credit bureaus if your score suddenly drops dramatically. If you are going to be making multiple balance transfers at the same time, then make sure to complete all balance transfer requests within the same few days. As your credit score might go down as a result of the relocated or new balances and the other credit card issuers might lower your credit limit or close your accounts. So make sure you’re done with the balance transfers as soon as possible. I usually recommend completing balance transfers with Bank Of America first (if applicable) as they tend to act the fastest with closing accounts once they see your balances going up by other credit card issuers.

Once the balance transfer is complete, at that point even if your credit card gets closed you will still have the same 0% APR terms.

If you have any questions about balance transfers then please leave a comment and I will make sure to respond. Thanks!