Using a balance transfer credit card with no balance transfer fee is a great way to save money while paying off debt. Thinking you can’t go wrong with a no-fee balance transfer could be a costly assumption, however. There are a few common mistakes you should familiarize yourself with and make sure to avoid if you want to get the most out of a no-balance-transfer-fee credit card.
1. Focusing on Balance Transfer Fees Instead of the Total Cost
Signing up for a balance transfer credit card with no transfer fee may sound foolproof, but keep in mind that “no transfer fee” does not always mean you get an introductory 0% APR on your transferred balance. If you don’t get a low intro APR, interest charges could end up costing you a lot more than a transfer fee over the course of your payoff period.
Even if you do have a 0% APR period as well, you could wind up paying much more in the end if you don’t pay off your balance by the time that intro period is over. A much higher regular APR will take effect at that point.
It’s best to run your balances, along with the details of your credit card offers and your planned payoff period, through a balance transfer calculator before you apply for any balance transfer credit card. That way, you can be 100% sure you’re on the road to saving money.
2. Not Transferring the Balance Soon Enough After Opening an Account
Deals like 0% APR periods and $0 transfer fees may have a ticking clock attached to them. These great intro offers can disappear 60 days after you get approved for the card, for example, which means that if you don’t do your balance transfer by then, your money-saving debt payoff plan disappears along with the deals.
By the time you apply for your chosen balance transfer credit card, make sure you’ve read all the fine print and have a plan to execute your balance transfer. Many balance transfer cards allow you to begin the transfer process right on the application, so take advantage of the suggestion, and don’t let the time get away from you.
3. Making Purchases on Your Balance Transfer Card
Getting a new credit card can excite the urge to spend. But after you’ve transferred a balance to your card, extra spending is especially harmful. Unless there’s a 0% purchase APR, new purchases made after a balance is transferred to the card will accrue interest immediately, because the grace period goes away when balances are carried from month to month.
New purchases on balance transfer cards can negate the savings in interest charges that predicated the transfer in the first place, so it’s better to avoid them. And even if the card does also have a 0% APR on purchases, consider whether or not new purchases will set back your payoff date before you rack up a new bill.
4. Assuming a Decent Balance Transfer Credit Card Will Always Be Available
If you think it might be smart to only pay the minimum each month on a transferred balance, assuming you can transfer the remaining amount to another credit card when the promotional rate expires, you may want to reconsider. The availability of good balance transfer offers is dependent upon the health of the economy. When times are good, card issuers tend to have great balance transfer offers. Likewise, good balance transfer offers tend to dry up when things aren’t so good.
In other words, don’t bet on the idea that good balance transfer offers will exist in the future to bail you out. The future is notoriously hard to predict, and these deals often go away. Instead, make a plan to pay off what you owe in a reasonable amount of time, assuming another balance transfer card won’t be available.
A credit card with no balance transfer fee can be a great tool to pay off debt faster without paying extra money. But ultimately, how much you save with a no-fee balance transfer depends on how – and when – you handle the transaction.