Our first balance transfer

My wife had pulled a loan back in 2004 for $1,000 at an interest rate around 9.9%. This is when I discovered balance transfers. Credit card companies will allow you to transfer an existing debt (another credit card balance, existing loan, etc.) to your credit card up to the credit limit on the card. Usually there is a one-time transfer fee and an interest rate you pay on this balance.

Recently credit card companies have been introducing credit cards that do no charge a balance transfer fee and a low or 0% interest rate on the balance for an introductory period (usually 6 months). This is a great deal for those looking to pay off an existing debt that has a high interest rate.

I had my wife apply for the Dividend Platinum Select MasterCard from Citi which offers balance transfers for the first year with no initiation fees and a 0% interest rate for the first year. We had the option of requesting a check payable to her name or having the credit card company directly pay off her loan. We elected for the check and received it in the mail about 3-5 business days after the request over the phone was made. She then deposited the check into her account and transferred the needed funds over to pay for the personal loan. She now has a $1,000 loan from Citi at 0% interest (instead of the personal loan of $1,000 at 9.9%) in which she must pay off in one year.

There are a few catches to balance transfers you will need to keep in mind:

• If you do not pay the monthly minimum on the balance transfer on time each and every month the credit card company will kick the interest rate up, sometimes up to 30%!


• If you continue to use the credit card that you used for the balance transfer please be aware that your monthly payment first goes toward the charged amount for that month and THEN to the minimum required on the balance transfer. This can be tricky and how most people end up getting switch over into paying the high interest rate, so I would not continue to use your credit card after the balance transfer is made. Put the card away in your sock drawer until the balance transfer is completely paid off!


• You need to make sure you pay off the balance transfer by the end of the introductory period. After the period expires, the rates will be jacked up, sometimes up to 30%!

As always, read and completely understand the fine print for the credit card before you do any kind of balance transfer. You could call the customer care department of the credit card company to ask questions, but the representatives on the other side don’t always have the latest facts and if a mistake is made, you will be the one to pay.

To learn more about balance transfers check out bankrate.com’s site: http://www.bankrate.com/brm/green/cc/cc11.asp