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How To Manage Balance Transfers

If you’re looking to transfer a high-interest credit card balance, now is probably one of the best times in years to do so.

If you have reasonably good credit, there are tons of good deals out there. (Start with the balance transfer offers in our credit card database.)

These offers come with some of the cheapest borrowing rates you can get and almost instant access to the money.

But transferring balances can also get you in a lot of trouble if you’re not careful.

Here are some tips I’ve learned over the years:

Open your junk mail. While you can find lots of good deals on the Internet, the solution may be sitting right there in your mailbox.

Look for the lowest APR. Obviously, you can’t do much better than 0% interest. But if you can’t get a 0% offer, several issuers offer balance transfers with single-digit interest rates.

Look for the lowest balance transfer fee. Banks used to charge 4% to 5% of the amount transferred, but now you can find offers of 3% or less. Some also offer a dollar limit on the fees they charge, say $75. That’s a big savings. Capital One is notable for not charging any fees, but that’s easily offset by the high APR it often charges.

Look for the longest transfer period. The Citi Simplicity card offers 0% on purchases and balance transfers for new customers for 21 months, one of the longest periods we’ve seen. Its fee is a low 3%. The PenFed Platinum Rewards card has a 4.99% APR offer for the life of the balance on transfers made before June 30, 2012, with no fee. After that, the APR will be a variable 9.99% with a 3% transfer fee.

Make sure you know precisely when the low-rate period ends. Always make sure you can pay off the balance, or transfer it to another bank, before the expiration date. Otherwise you could be paying a lot of money when the APR changes.

Set it and forget it. If you can’t live with that uncertainty, several banks offer deals that let you carry the balance at a low rate for the life of the balance. Besides the PenFed offer above, the Simmons First National Bank Visa Platinum Card offers a lifetime 7.25% APR with no annual or balance transfer fees. But don’t ever be late paying your bill. If you are, the APR will revert to whatever the highest prevailing APR is.

Choose low APR over a low transfer fee. The low APR is almost always better, depending on how long you think you’ll be carrying the balance. Why pay everything up front if you find a better deal in the meantime?

Don’t pay off your balance with a check from the same bank. If your credit card company sends you a balance transfer check, don’t use that check to pay off your existing balance on that card. Even if you first deposit it in your checking account and then write another check to pay off your balance, you will be charged the card’s current purchase APR — and you’ll get slapped with a transfer fee.

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