Despite their popularity, credit card balance transfers still seem to trip a lot of people up. They’re really not that complex, but credit card issuers don’t take too much time to explain them. They just throw ’em in your face.
Below you’ll find my “balance transfer dictionary,” which attempts to demystify these money-saving bad boys once and for all.
0% APR balance transfer – a balance transfer that offers 0% APR for a certain promotional period, typically 12 months or longer.
Balance transfer APR – the interest rate tied to the balance transfer amount, which is generally 0% and then adjusts to the standard purchase rate after the promotional period comes to an end.
Balance transfer arbitrage – the act of exploiting the spread between the 0% APR period on balance transfers and high yield savings accounts in order to make money.
Balance transfer calculator – a calculator used to determine how much money a balance transfer will save you, and essentially if a balance transfer is a good idea.
Balance transfer check – a blank check that can be used for any purpose up to your credit limit. The balance transfer APR will be applied once the check is cashed.
Balance transfer fee – the fee charged by the credit card issuer who assumes your debt. The average fee is 3%, typically with a minimum of $5-$10.
Balance transfer limit – the max amount of debt you can transfer to your balance transfer credit card, dictated by the credit limit on the balance transfer credit card.
Balance transfer rate – see balance transfer APR.
Cash advance – an instant cash transfer that accrues interest immediately, often at a very high interest rate. These should be avoided.
Credit card balance transfer – the act of transferring credit card debt from one credit card to another in order to avoid paying interest.
Credit card finance charges – the amount of interest you must pay monthly when you carry a credit card balance, determined by the credit card’s APR.
Fixed-rate balance transfer – a balance transfer that has a fixed interest rate, either for a certain period of time or for the life of the balance.
Free balance transfer – a balance transfer that offers 0% APR and does not have an annual fee or a balance transfer, or any other fees of any kind.
Grace period – the amount of time between when your credit card cycle closes and when payment is due to avoid paying interest on a balance (does not apply for balance transfers, which always carry a balance).
Interest-free credit card – a credit card that does not charge interest for a specific period of time. Note that it will only be temporary to lure in new cardholders.
Lifetime balance transfer – a balance transfer that has a low fixed APR for the life of the balance.
Maximum fee – the most you can be charged to transfer a credit card balance (many balance transfers no longer have a maximum).
Minimum payment – the absolute minimum that must be paid each month when you carry a credit card balance.
No fee balance transfer – a credit card balance transfer that is not subject to a balance transfer fee.
Waived balance transfer fee – the act of getting a balance transfer fee waived, typically for customer loyalty or simply by asking.