Money Wise Pastor

Career, life, and money wisdom from a pastor's perspective

Credit Card Balance Transfers Can Save You Money

| By Rich | |

If you’re carrying a credit card balance with a high interest rate, a balance transfer can save you big money.  But it can also get you into more high-interest debt if you’re not careful.

Credit card companies are once again offering attractive balance transfer deals – the likes of which haven’t been seen in four years.  In fact, some are offering 0% interest for up to 21 months on the balance transfer and new purchases.

The best balance transfer deals are offered to people with good to excellent credit – typically a credit score around 750 or higher.

Not sure what your credit score is?  Get Your Free Credit Score.

How a Credit Card Balance Transfer Can Save You Money

credit card balance transferSuppose you have a balance of $4,000 on your credit card with an APR of 17%.  If you transfer your balance to a credit card with a 0% interest rate for 12 months (with a transfer fee of 4%), you’ll save $520 in interest after your balance transfer fee of $160.

Sounds good right?  Yes!

How a Credit Card Balance Transfer Could Put You Deeper in Debt

Unfortunately, some people put themselves into deeper debt after they’ve done a balance transfer.  Here’s how:

  1. They kept making charges on their original credit card or made charges on their new card.
  2. They made a late payment (yes, even just one late payment!), which caused their introductory rate to disappear.
  3. They fail to pay off the new card before the introductory period ends, meaning that their balance is now charged a much higher rate – up to 20.99%.

How to Make the Most Out of Your Credit Card Balance Transfer

  1. Create a spending plan (a budget)
  2. Pay off your credit card balance before the introductory period ends.
  3. Pay your monthly payments on time.
  4. Don’t add any new debt.
We have done credit card balance transfers a few times over the years.  The greatest challenge we faced was to not add any new debt when “emergencies” arose.  
When you are in debt and don’t have an emergency fund, you end up getting stuck in a debt spiral because you’re in debt to begin with because you didn’t have money to buy something you wanted or needed, and then when an emergency comes up, you still don’t have any money to pay for it.
That’s why I believe it is very important to create a spending plan, or budget, to make sure you live within your means, create a schedule to pay off your debt, and help you save (even if all you can do is a few dollars a month) for future emergencies.
Have you ever done a credit card balance transfer to help you save money and pay off debt?  What was your experience like?

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About the author

Rich Rich writes on money and personal growth from a pastor's perspective here at Money Wise Pastor. He loves In-N-Out Burger (and has the t-shirts to prove it), big cities, international travel, running marathons, and helping others create more freedom, purpose, and fulfillment in their life and work. Find him on Twitter and Facebook.