Credit Card Balance Transfer Offers

Balance Transfer Minimum Payment

How Much Are You Required to Pay Each Month?

One downside to a credit card balance transfer is that the minimum payment may be higher than that on a standard credit card balance tied to purchases.

For example, Discover calculates minimum payments on purchase balances by asking that you pay 2% or $40, whichever is greater.

So if your balance were $3,000, you’d have to pay $60 to satisfy the minimum payment requirement every month.

For balance transfers, Discover asks that you pay 2% plus $40.

The $40 is not a fee of any sort, but rather their method for calculating minimum payments on balance transfers.

The way they see it, by making higher minimum payments each month, you’ll pay off your balance quicker and probably reduce their chance of losses at the same time.

So if that same $3,000 was a balance transfer amount, you’d have to make a $100 minimum payment each month.

That’s considerably higher than the $60 you’d be paying on a normal purchase balance, and something to take into account when deciding if a balance transfer is a good idea.

Minimum Payment Will Drop Over Time

The good news is that the minimum payment required will shrink over time as your credit card balance decreases (for obvious reasons).

For example, if you pay that $3,000 balance down to $1,500, you’d only have to make a minimum payment of $70 based on the same formula from above.

Be sure to speak with your credit card issuer to see how they calculate minimum payments on balance transfers to avoid any nasty surprises down the line.

Now let’s get one thing straight – there are worse things in life than being required to pay off you credit card balance faster. It’s a prudent move, so getting a little nudge is just fine in my book.

It means you’ll be free from debt sooner rather than later. Just make sure you can afford it because minimum payments have the potential to increase.

Read more: Balance transfer pitfalls.