Credit Card Balance Transfer Offers

I recently noted that Discover was offering 0% no fee balance transfers to select customers via snail mail.

Well, Chase seems to be doing a similar promotion.

The company currently has an offer for certain lucky customers (some with Amazon branded credit cards) that comes with two special balance transfer options:

- 0% APR for 12 months with a 1% balance transfer fee
– 0% APR for 18 months with a 2% balance transfer fee

While these aren’t no fee balance transfer offers, they are reduced from the standard 3% balance transfer fee Chase typically charges.

Let’s take a look at the potential savings, assuming you’ve got a credit card balance of $5,000 @20.99% APR.

With the standard 3% balance transfer fee, you’d pay $150 for the privilege of transferring your balance.

With the 2% balance transfer fee, you’d pay just $100, and you’d get an additional six months to pay down your balance to zero before incurring any finance charges.

Finally, if you took the 1% balance transfer fee offer, you’d pay just $50, thereby saving $100 over the standard rate.

So you can save some decent money if you happen to receive one of these offers in your physical mailbox (not your e-mail inbox).

You can also log in to your existing Chase credit card account online and click on the balance transfer tab to see if the offer is there.

If not, there’s still a way to get a Chase no fee balance transfer, thanks to a cash back offer that will offset the standard 3% fee.

Chase will give you $100 cash back for transferring at least $500, so a $3,000 balance transfer would actually net you $10.

And smaller transfers would make you even more money.

For example, if you transferred the $500 minimum, you’d pay a $15 balance transfer fee but get $100 cash back, or $85 net profit.

Not a bad deal if you aren’t one of the select few picked by Chase to receive these new special offers.

Tip: What credit score is needed for a balance transfer?

A lot of consumers seemed to get tripped up when inquiring about credit card balance transfers.

As I’ve said before, credit card issuers don’t do a great job explaining how they work. Instead, they simply bombard you with offers in your mailbox, inbox, and anywhere else.

So let’s set the record straight. You cannot execute a balance transfer within the same bank.

Let’s look at an example shall we:

Citi credit card balance: $2,000
Citi credit card APR: 19.99%
Citi balance transfer offer: 0% APR for 21 months
Balance transfer fee: 3%

So you’ve racked up some credit card debt with Citi to the tune of $2,000. Knowing that you’re paying some serious credit card finance charges, you look into available balance transfer offers.

It’s not long before you discover that Citi has the longest 0% balance transfer offer, at a staggering 21 months.

Unfortunately, if you look at the fine print, you should notice that you cannot transfer your existing Citi credit card balance using a Citi balance transfer offer.

Sure, they may give you a balance transfer check, which after being deposited into your checking account, could be used for just about anything, including paying off your Citi balance.

But that’s not very kosher, nor should you rely on that being a possibility as not all banks offer balance transfer checks.

Instead, you’ll need to consider balance transfer offers from other leading credit card issuers, such as Capital One, Chase, and Discover, to name a few.

Why Not?

You may be wondering why you can’t execute a balance transfer within the same bank.

It’s simple really; why would a bank allow you to shuffle debt within their own bank to a lower interest rate?

Banks only extend 0% balance transfer offers to take on your debt in the hopes of making interest off you and gaining you as a customer.

If they already have you as a customer and are making money off you, why would they want to change that in any way?

The short answer is they wouldn’t, which is why you don’t see banks offering to move debt within their own institution.

Fortunately, there are plenty of banks out there that offer balance transfers, so you should be able to find a suitable alternative, even if you had your eye on an offer from your current bank.

Just know that this is one of the many balance transfer pitfalls, especially if you’ve burned through a number of banks already while playing the balance transfer arbitrage game.

Tip: Does a balance transfer hurt your credit score?

In my never-ending quest to keep track of any and all no fee balance transfer offers, I’ve received word that Discover is still offering its no fee balance transfer to select customers.

It’s the same aggressive offer that was open to all customers up until earlier this year.

Unfortunately, it’s more a they come to you, rather than you go to them type of offer, meaning you’ve got to be one of the lucky ones who receives a “golden ticket.”

By golden ticket, I mean a letter in the mail that offers you 0% APR for 12 months on balance transfers with no balance transfer fee.

I’ve seen them, and heard of people receiving them, but they’re few and far between, and probably only going to their best existing customers with solid credit scores.

Doesn’t Hurt to Ask

That said, it doesn’t hurt to ask Discover for this offer or to waive the balance transfer fee if you take them up one of their similar offers with a balance transfer fee.

You can use those mailers to your advantage to make your argument. Hey, it’s no skin off your back, regardless of what they may say.

Tell them you’ve got good credit, are a good customer, etc., etc. Plead your case.

You’ve Got Options

Assuming that doesn’t work, there are other similar options still available.

For example, Chase Freedom will give you 10,000 bonus points, redeemable for a $100 check, if you transfer $500 or more during the first three months from account opening.

So if you balance transfer $500 or more to their Freedom card, that $100 could completely offset the 3% balance transfer fee.

Assuming you transfer say $1,500, you’d pay $45 in balance transfer fees, but net $55 thanks to that $100 cash back bonus.

And you could actually transfer more than $3,300 and still keep it a no fee balance transfer, so it works in a variety of situations.

As you can see, there are more ways than one to get your hands on a no fee balance transfer. You’ve just got to be a bit more creative these days, assuming you’re not one of the lucky ones referred to earlier.

Heck, even if you do have to a pay a balance transfer fee, there’s a good chance you’ll save a ton of money by avoiding credit card finance charges.

Remember, if and when any no fee balance transfer offers appear, you’ll hear about them here.

Read more: How does a balance transfer work?

(photo: AnsyDuPiton)

Perhaps one of the best ways to efficiently and effectively consolidate credit card debt is via a balance transfer.

You’ve probably received balance transfer offers from your credit card issuers, but if you don’t know what a balance transfer is, check the link below for an in-depth explanation.

(What is a balance transfer?)

Credit card balance transfers were essentially created with consolidation in mind, so what better way to corral and tackle your debt than a balance transfer?

Let’s look at an example to illustrate the benefits and the savings:

Credit card A: $3,000 @21.99% APR
Credit card B: $2,000 @24.99% APR
Balance transfer offer: 0% APR for 18 months from Discover.

Assuming you’ve got $5,000 in total credit card debt at outrageous (but all too often common) interest rates, you’d be bleeding money every month just in credit card finance charges.

In our scenario, you’d be paying roughly $97 a month just to cover the interest. That’s nearly $100 down the tubes for no good reason. Why would you subject yourself to that?

Especially if there’s an easy solution…enter the balance transfer offer.

If you moved that $5,000 in credit card debt to a new Discover credit card that offered 0% APR for a full 18 months, you’d consolidate your debt and shield it from interest for a year and a half.

This particular offer would have a 3% balance transfer fee, which would amount to $150, but that beats paying over $1,000 annually in finance charges by keeping it with your current credit card issuers.

Not only that, but you’d also have all your debt in one place, making it convenient to pay off and easy to track.

If your debt is scattered among a slew of different credit cards, it can be difficult to get out of the debt spiral. And you definitely don’t want to miss a payment…that would be disastrous for your credit score!

Balance Transfers Are Simple and Straightforward

So there it is – balance transfers are the best way to consolidate credit card debt. Sure, you can go with a pure “debt consolidation” company, but those are typically riddled with fees and may have a negative impact on your credit if they make odd deals with your creditors.

That type of stuff is reserved for people in serious financial distress anyways.

A balance transfer is a more straightforward and dare I say “legit” method of consolidation, without the stigma of being considered “debt consolidation,” if that makes sense.

They’re also simple to execute, and will only require you to fill out a simple credit card application, while providing basic information about the accounts you want to pay off.

Read more: Does a balance transfer count as a payment?

It’s that time again, where I compare balance transfers to other financial instruments to see which is best in particular situations.

Today’s matchup: “balance transfer vs. personal loan.”

Balance Transfers

In short, a balance transfer allows you to shift high-APR debt from one credit card to another (what is a balance transfer?).

Sometimes, you’re also able to deposit cash into your bank with the use of a balance transfer check.

If this is the case, you can pay down pretty much anything else as well, be it an auto loan or some other outstanding loan you’ve got.

Either way, balance transfers typically offer some kind of promotional APR for a fixed period of time.

For example, it’s common to see 0% APR for 12 months on balance transfers.

This means you pay zero interest for the first year – after that, the balance transfer APR shifts to the standard purchase APR, which will likely be in the high teens to low 20% range.

Personal Loans

A personal loan, on the other hand, provides you with a lump sum of money that can be deposited into your checking/savings account.

That money can then be used to pay off high-APR debt of any kind, such as credit card debt, an auto loan, a cash advance, etc.

Typically, the interest rate is fixed and the loan has a certain duration, such as five years.

For example, you may qualify for a $10,000 personal loan at an interest rate of 13% APR, with a term of five years.

You’d pay roughly $3,700 over that time to borrow the money, which obviously beats a 20%+ interest rate you may have on other credit card debt.

But is it the best move?

Perhaps you could balance transfer $10,000 worth of high-APR debt to a credit card offering 0% APR for 24 months.

And then make sizable monthly payments until it’s paid off in full by month 24. In this case, you’d only pay the balance transfer fee, which if the standard 3%, would be $300.

That sure beats paying $3,700 in interest, right?

Well, it’s not quite that simple. With the balance transfer, you’d be paying roughly double each month to pay down the balance to zero before the rate resets higher.

Additionally, you may not be able to qualify for a $10,000 balance transfer, so there’s a chance you wouldn’t be able to convert all the debt to a 0% balance transfer credit card.

Pros of Balance Transfers

- 0% APR
- Less interest paid
- Lower monthly payment

Cons of Balance Transfers

- Less time to pay of the balance
- Variable rates once promotional period ends
- Good credit score needed
- Balance transfer fees

Pros of Personal Loans

- Fixed interest rate
- Larger loan amounts possible
- More time to pay off the balance
- Options for those with poor credit

Cons of Personal Loans

- Higher APR
- More interest paid
- Down payment may be required
- Possible prepayment penalty

So there it is…for me, the balance transfer is always going to be the better choice, assuming it’s an option.

But it requires a good credit score, and may be limited as far as what debt can be paid off. You also run the risk of getting hit with a variable rate if you don’t pay it off during the promotional period.

However, the savings associated with a balance transfer can be monumental if you’re responsible and dedicated to tackling your debt.

Also see: Balance transfer vs. cash advance.