I have a few credit cards (and yes, I use them responsibly, get “points” for them, and pay them off on time). Recently I got an email suggesting I transfer a balance from one of my other credit cards, to my “Big Bank” credit card.
I didn’t really worry about it, since I never carry a balance. But – since the email kindly broke down what I could if I did do a balance transfer, I thought it’d be a handy thing to share with folks.
The “Big Bank” credit card was offering the following:
- A “special” low annual interest rate of 1.99% on balance transfers
- The rate would apply for up to 6 months
- A balance transfer fee of 1% of the balance I’m transferring would apply
And how much would I save?
- If I was carrying a 5,000 balance on retail store/gas credit card, and it had an interest rate of 28.8 %, I’d pay 481.80 in interest over 4 months
- If I was carrying the same balance on another credit card, with an interest rate of 21.99 %, I’d pay 364.82 in interest over 4 months
- But – if I transferred it over, as was only paying 1.99% a month, I’d only be paying 82.45 a month! And this includes the 1% balance transfer fee.
Overall, it sounds like a pretty good deal. And it is – is you make sure you pay the balance off before the rate goes up, and you don’t do anything that could cause the bank to revoke their offer, and start charging you the full interest rate (Always read the fine print!).
Of course, the best thing to do is just pay off the balance in full NOW, but that’s not always a viable option.
Have you ever done a balance transfer? Or sat down and calculated how much you could save with a much lower interest rate?