Why use a Balance Transfer?

[Anonymous]

I do have a sincere question? because i never had to use it. I see people that do get cards for a balance transfer. Why is the method valuable to a lot of consumers. I never had to do or even use it, even though my card offers it. What is the benefit of doing it, when you still got to pay it off or you pay your balance off in full every month.

[UncleB]

@Anonymous, I've moved your question to a new thread where it can be more easily addressed by the community.

--UncleB

myFICO Moderator

[Anonymous]

Say you have a project to do on your house or an expense that will cost $3,000 and you charge it on your credit card that has 20% APR. If you can't pay it in full, you will make payments until you pay it off BUT with interest at 20%. Some people would transfer that $3,000 balance (balance transfer) to a card that offers 0% APR for 12 months.

Other than paying a balance transfer fee of usually 3% ($90), you will not pay interest on that $3,000, which will be better than paying interest if you leave it on card with a the 20% APR. Makes sense? It is just a way to pay off a balance without paying any interest.

[Anonymous]

For me, we have only ever had one CC for the last 5 years and I have a small (500) balance on it. We pay every month but its not the best interest rate. I just transferred it to our new Chase freedom card so that I can pay it off even faster without interest. Balance transfers I am assuming are only a good deal for people who are carrying balances that they cant pay off that month. 

[Anonymous]

Ok, so you transfer the balance to another card with 0% interest. How long will that interest rate be 0%. wouldn't that be applied to a new card or do companies offer that long term to some card as long as the account is open........

[longtimelurker]

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@Anonymouswrote:

Ok, so you transfer the balance to another card with 0% interest. How long will that interest rate be 0%. wouldn't that be applied to a new card or do companies offer that long term to some card as long as the account is open........

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In a lot of cases it's going to be a new card that people got knowing about the upcoming big spend.

It doesn't have to be 0%, just significantly less than the rate on the other card, so that the fee (if any) doesn't negate the savings.

It's not only for those that cannot PIF, some people transfer to a 0% card and use the money for something more profitable for a period of time, and PIF later.    Not a strategy for everyone but for some it makes sense.

[Anonymous]

Every bank is different, some have 0% for 12 months, sometimes 18 months. Also, some banks like Navy Fed charge $0 transfer fee if it was an offer sent to you personally.

[Anonymous]

Our new card is 0 interest for 15 months. 

[sueblue34]

I’m still in the rebuilding stage but here is my take:

To me this only makes sense if you are not charged abalance transfer fee and it has 0% interest. Also you need to be able to pay it off while your on the 0% interest time allotted. That’s the only way to save money that would otherwise go towards interest.

Sometime you may be awarded a higher credit line for doing the transfer which is a plus.

Other than thati see it as just shuffling debt around if you haven’t managed to pay it off while you under the 0% promo.

[UpperNwGuy]

Why use a balance transfer?  Easy question!  To save money and get out of debt faster.  When I retired, I was carrying some hefty credit card balances.  How I got to that point is a long story that I won't share here.  A few months before retiring, I got the Citi Simiplicity card and transfered a $13,000 balance from another card and kept it there at 0% APR for 20 of the 21 allowable months, only paying the minimum payment each month.  During that period I focused on eliminating the balances on my other cards.  In the 20th month, I paid the Simplicity off in full.  Citi's next statement said that I saved $1,700 in interest by using the balance transfer.