Money Talks, So Should You

Q&A: Should I transfer credit card balances?

Mechel Glass
by Mechel Glass, Dimespring Contributor  (@CredAbility)

Credit card offers promoted with short-term interest rates as low as zero were common more than five years ago. They nearly vanished during the economic downturn. But lately many people with decent credit are starting to find offers in their mailbox with low or no interest for six months or longer.

It can make sense for some people to transfer from a higher interest credit card to one with a lower promotional rate, especially when it results in paying off the card before the promotional rate expires.

It’s important to read the fine print and then do the math. The promotion may include a balance transfer fee, often a percentage of the amount added to the new card.

READ: Does credit card debt transfer to your children after death?

If there is a fee, calculate the total interest charges if you paid off the debt under current terms over the same time frame.

If you come out ahead paying the balance transfer fee instead of the interest you would have paid, you should take a realistic look at your ability to pay off the balance before the end of the low-rate promotion. Someone who has had trouble making a dent in a $5,000 credit card balance for the past six months probably won’t be able to pay it off by the time a six month no-interest promotion ends either.

The good news is people don’t have to settle for the offers that find them. Some people are successful negotiating with their credit card companies for a lower rate. If that doesn’t work, you can shop around for the most favorable interest rates over a realistic payoff time.

READ: What risk factors lead to debt trouble?

You can find many online resources to compare credit card promotions. I often recommend Bankrate.com.

The important thing to keep in mind is to make balance transfers only after you’ve done the math and have a plan in place to pay off the balance.

But if you come out ahead after making calculations and you have the ability and discipline to pay off the balance during the promotion period, this is a good option for you.

 

Mechel Glass is vice president of community outreach for CredAbility. She is responsible for coordinating community outreach and financial education activities across the agency’s regions and developing new education programs for both classroom settings and online. Glass, a U.S. Army veteran, is also co-author of “The Veteran’s Money Book,” scheduled for publication in April 2014 by Career Press. The book can now be ordered on Amazon.com.