Tired of high credit card fees? Why not reduce your interest payments by transferring your balance to another card?
A balance transfer is the smartest and easiest way to reduce credit card costs. Just make sure you understand the terms and conditions of the new card, so that you can maximize your savings.
Before you expire and replace your credit card, consider whether you want to keep your current card. If so, just ask for a lower interest rate. Tell your credit card company that you've got another card at a much lower rate and that you'll need to transfer your balance if it can't settle your transaction. However, if they decline your request, be prepared to do so.
Why use Balance Transfer?
A balance transfer can bring many benefits to cardholders. Transferring a balance to a lesser credit card can lower your interest rates and fees significantly. Credit card companies charge different interest rates on balance transfers and purchases. The most common rate is 0 percent for six to 12 months.
For example, no interest for 12 months for Chase Ultimate Rewards MasterCard and Citi Platinum Select MasterCard balance transfers and purchases. Chase's Discover Platinum Card and Hayes Visa offer reduced introductory rates after eight and six months, respectively.
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Some cards combine an introductory annual percentage rate (APR) with the billing cycle. GM Card and Fifth Third Bank Cash Rewards MasterCard charge 0 percent APR for the first six and four cycles, respectively.
You can also get other benefits by doing a balance transfer. For example, you'll be eligible for a new card with no annual fee, no overpayment increments, or cashback on purchases and other rewards. Some cards also offer car rental insurance, identity theft protection programs, and money-saving discounts.
How to transfer balance
Credit card companies typically use low-interest-rate balance transfers to attract new customers. There are three main ways to transfer the balance on the card. One way is to complete the documentation provided by your new card issuer. Or you can contact the credit card company to whom you wish to transfer the balance and arrange the balance transfer.
You can transfer your balance by writing a balance transfer or facility check. These simple checks look and work like regular checkups. All you have to do is write a check for the balance transfer amount and send it to the company from which you want to transfer the balance. Some probes become obsolete, so make sure you use them on time. If you do not do so, you will be charged for the regular interest rate set for your card.
Whichever transfer method you use, you can transfer as much as the credit limit on your card.
Transaction costs and other fees
Banks usually treat arrears transfers as cash advances and charge similar transaction fees. There is no charge for dues transferred in response to a special offer. But for Citi Platinum Select and many other companies, the transaction fee for balance transfers is 3% of each balance transfer amount, with a minimum of $5 and a maximum of $50. Keep in mind that very few people can transfer funds as the transaction fee may exceed your potential savings.
Apart from the standard transaction costs, banks also charge special fees which may surprise you. Some of the most common special charges include:
Late Fee – Some banks wait a few days before estimating a late fee, but many levies it a day after payment. Companies charge either a flat fee, such as 10 or $15, or a minimum percentage of what is owed, such as 5 percent. To avoid late fees, mail your payment so that it arrives before the balance is due. If you pay your bill at a bank branch or ATM, find out how long it will take to process your payment. Sometimes the payment made at a branch or ATM is not credited for a few days.
High credit limit fee – Most cards charge a fee if you exceed your credit limit. These charges are levied each time you exceed your limit, so you'll need to incur several of these charges during the same billing period. Banks typically charge $10 or $15 for this fee or 5 percent of the amount at or above your limit. These charges are in addition to the interest charges.
Lost Card Replacement Fee? If your card is lost or stolen more than once and you need a new card, some companies will charge you a replacement fee. These fees range from $5 to $10.
To pay
After you transfer the balance, make sure all your payments are complete and on time otherwise, you will automatically be charged more. Generally, there is no extended tenure for arrears transfer, so interest will accrue immediately. (If you have an introductory 0% APR, no interest will actually accrue.)
While making a payment, it is important to understand that the payment you make will first apply to the lower or incentive dues and then to the higher APR. This means you'll be doing a 0% balance transfer before touching the balance on regular purchases, which can be charged at a rate of 9 to 18 percent. As a word of advice, consider using a separate card for your regular purchases and paying off the balance each month. Limit your balance transfer to a different card.
After the Evangelist's Honeymoon
As it expires, normal interest rates will apply. The standard variable APR for Citi Platinum purchase (8.99%) will be applied on all outstanding purchases and outstanding transfer amounts. Similarly, the standard variable APR (19.99 percent) for cash advances will be applicable on all cash advances. If you default in the Citi Platinum Card Agreement, the Company may immediately increase the APR on all balances, including any promotional balances, to a variable default rate of 28.99 percent.
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Your initial APR will depend on your credit history. If this interest rate is much higher than the rate on your old card and you have an outstanding balance, you will lose your money. Of course, you can transfer your balance to a new card with a lower promotional rate. Just be careful not to get caught in a vicious circle that can turn later
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