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How to Win the Balance Transfer Game

For folks who have a balance on their credit card, there are few deals more tantalizing than 0% interest on balance transfers. Why? Because for a period of time, typically six to 12 months, the credit card company is lending you its money for free. That can mean big savings on interest charges for those with revolving balances.

It's not unusual for American households with credit card debt to carry balances of $10,000 or more. Typical U.S. families pay more than $1,000 in interest charges on credit cards each year. And rates on most credit cards are locked firmly in the double digits -- quite a bit higher than 0%.

Those stats explain why these balance transfer offers are seductive enough to make many consumers skip over the fine print before signing on the dotted line. If you're considering such an offer, you'll want to take a hard look at whether it's such a good deal after all.

Who is eligible?
Typically, these offers are available to consumers with very good credit, but even if you qualify, you might want to think twice before applying. If you're someone who struggles to meet a deadline and doesn't think ahead, you're sure to end up with a shocking rise in your interest rate before you've had a chance to switch to a different card.

Likewise, this is a loser's gamble for someone with a compulsive spending habit. All that a 0% balance transfer offer will do for shopaholics is convince them that they have even more "free money" with which to overspend. Somewhere along the line, they'll have to pay the piper -- and odds are, the piper's interest rate will be much higher than 0%.

The best candidate to play the balance transfer game is someone who is serious about paying off his debt and has a plan for paying it off within the grace period. If that sounds like you, read on for more tips on winning the balance transfer game.

What you need to know:

  • You have a tough competitor. Credit card companies aren't making these offers out of the goodness of their hearts. They are gambling that they'll win, based on experience and hard numbers. "Winning" for them means that you'll fail to pay off your balance or neglect to switch your balance to another credit card before the grace period is up.
  • There are few guarantees. Just because you're offered a teaser rate, it doesn't mean that you are guaranteed that rate, especially if your credit history is anything but spotless. Make sure that the 0% offer stays at 0% when your card comes in the mail.
  • Look for 0% on both balance transfers and purchases. Some cards offer 0% on balance transfers but not on subsequent purchases. In addition, they require that you pay off the balance transfer amount first, leaving the new, higher-interest-rate charges buried underneath. For example, if you transfer $10,000 to take advantage of a balance transfer offer, and then charge $15 on the new card for that cute shirt you saw on sale, your payments will go toward the $10,000 first, while the $15 is accumulating interest charges at the normal (translation: outrageously high) interest rate.
  • It pays to be choosy. Don't let the teaser rate make you turn a blind eye to the card's other features. You'll still want to shop for a credit card with no annual fee, for example, as well as looking at perks like cash-back plans and fraud liability coverage. If you decide to hold on to the card when your balance is paid off, you'll be happy you shopped around.
  • Make sure "free" means free. Some credit card issuers charge fees for each balance you transfer to their card. Again, you'll want to check the fine print on the offer.
  • Pay on time. Pay late even once and your low teaser rate will take a hike, leaving you with a new and much less desirable rate. You may also be slapped with a nasty penalty fee. To be absolutely sure you hold on to your good deal, you may want to set up automatic bill payment. Be sure you're paying more than the minimum monthly payment, however, so you can whittle down the balance.
  • Stay organized. Take note of the date your 0% deal will end and mark it on your calendar. Now back up six to eight weeks and make another note on your calendar to shop around for another balance transfer offer just in case you haven't yet paid off the balance. Don't rely on the credit card company to remind you.
  • Know when to fold 'em. Credit card companies know that you're trying to outfox them and will recognize a pattern of hopping around. That may hurt you in the long run by damaging your credit or causing all those low-introductory-rate offers to dry up. Credit card issuers simply won't want to waste their time on someone with a proven track record of cutting and running.

Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter.

Read/Post Comments (13) | Recommend This Article (63)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 29, 2008, at 4:01 PM, NightBengal wrote:

    I cannot stress the point on "Make Sure Free is Free" enough. It's common practice for many cards to charge 3% on balance transfers, but lately I've seen offers with upward of 5% fees -- and with no maximum, or a maximum high enough that it should make you think thrice.

  • Report this Comment On December 31, 2008, at 10:28 AM, tbyrd58 wrote:

    Chase has come up with a new underhanded trick to move customers along. Chase customers who were extended lower permanent promotional rates are having there minimum payments increased from 2% to 5% and having a $10 dollar monthly fee added to their account. Several are reporting on credit card boards that callers complaining were told the increase is because of their promotional interest rates and have received a counter offer of doubling their interest rate but retaining their old minimum payment.

  • Report this Comment On February 27, 2009, at 12:28 PM, RebeccaJYR wrote:

    Jumping from credit card to credit card to take advantage of low balance transfers may hurt your credit rating? Gee, what DOESN'T hurt your credit rating these days? So basically the fact that you're savvy enough to do this sort of thing, hurts you in the long run. Figures.

  • Report this Comment On May 20, 2009, at 5:16 AM, Prestito wrote:

    Credit cards are our life saver in terms or emergency spending or when we don't have enough cash to pay for our purchases. But just make sure that you have to pay on time to avoid higher interest rates.

  • Report this Comment On December 03, 2009, at 7:34 PM, batteeboy wrote:

    This is definitely the way to go.... Few years back I left a job I hated and it took me a year and half to find one that would lead to a future the year I was unemployed, my credit card debt ballooned to $12,000....eventually I was able to not only raise my FICO score but also get additional credit...whenever the 0% into period was over I 'd switch to a new cards.... but it does take a lot of organization and not using the cards; otherwise you could get more screwed than when you started..

  • Report this Comment On December 04, 2009, at 6:32 AM, benitus wrote:

    I don't know whether did anyone think of this tactic, which I use to keep myself from paying ANY interest or fees. I have about $10,000 in credit card debt (down from $50,000 some four years ago, when I was less disciplined with my finances), which I spread over some six or seven credit cards, so that the outstanding balance on each card is manageable and respectable (always less than $2,000 every month). I spread my expenses every month (up to $4,000) over all these cards, so that all the banks will keep on loving me, since they are earning fees from the vendors where I make my purchases (I never pay cash). Every month, I will make sure that I will pay off the full balance in at least one card, from my "meagre" salary. Then I will transfer the full balance from one card to this card, from a third card to the second card, so forth and so on, so that every card will be fully paid and I don't pay any interest charges at all. I will pay off a different card in full each month, so that there is evidence of physical payment (instead of only using balance transfers). The banks are also happy because my account is active and their transactions are healthy, which is why all these banks keep on increasing my credit limit at least once in two or three years, without having to ask or apply for them (total credit-line is six-figure). I NEVER max out any card and I NEVER abuse the use of credit cards, as I have a free source of free money at any time. Once, I made a downpayment of $10,000 on a house purchase, which I again spread over all these cards, and I was able to maintain my free use as usual. That was how I was able to reduce my debt from $50,000 down to $10,000 without cutting back on our standard of living, which includes an annual holiday and all the usual expense. Don't ever make the mistake of switching banks, unless they stop offering no transfer fees, because track record is most important to improve your credit score (mine is 780). I hope this will help someone at least from going under with debt. Contact me by email if you need help. Have a great day and God bless always.

  • Report this Comment On December 04, 2009, at 12:15 PM, rcallain wrote:

    Benitus...we DESPERATELY need help like yours!!! How do we get in touch with you to get more details like what bank did you use and more specifics on how to go about avoiding trf fees? We got ourselves into cc debt after I lost my job while pregnant with twins. We were able to stay on top by using our cc's and 0% int(Thank you Discover card even though we paid our transfer fees...still better than paying interest. Now are are so close, I am working again but had a few setbacks with a flooded basement needing new carpeting and washer/ we need to get these over with once and for all. Our credit was decient at last mid-700's but I did close a bunch of old accounts before reading articles like this.

  • Report this Comment On December 04, 2009, at 12:56 PM, AndyLemore wrote:

    Well if this is true that you have never paid intrest on any of your card this is really big deal. but I am not sure everything you wrote is correct. How many CC banks/ Credit Union offer No balance Transfer Fee? say all off them with you hadd business so far in last 6-7 years.

    yet, any btrf will take at least 3-4 business days. every month after paying one card fully with your sallary you will be able to make btransfer to pay fully second card. and once second card recieve paymnet and that amount becom availible to you, after then only you will be able to to another Btrf from second card to Third Card. and so on. So this doesn't match with your explainantion thta you never pay any intrest on any card if you were also able to manage 4-6 cards with payment due date.

    Again above all of this, if I am not wrong,

    what anybody would like to see is what are the bank/CreditUnions which offers cc which has no transfer fee in current time if not for all time atlest for Promotional time. that will be the key point here.

  • Report this Comment On December 05, 2009, at 7:25 AM, benitus wrote:

    Dear rcallian: I don't know whether am I allowed to divulge my contact information online. Judging from your comments, it seems that you're in control of your debt and you're doing fine, especially with a credit score in the "mid-700s", which most people can only dream of. Congratulations and keep it up. You've proven that financial discipline and common-sense approach certainly work to get you out of debt. If we’re still in debt, then we can’t afford to be careless about our choice of expenditures, i.e. we can never afford to buy what we want, unless we have the means to “re-pay” it because we’re living on borrowed money, which is never guaranteed, so we must use it to our best advantage, viz. to help us to pay down our debt and to stretch our limited funds to get the most “bang” for our buck. So, we must always look for the least costly solutions to our needs (to conserve our limited funds to pay down our debt) because it doesn’t make sense to live in luxury when we’re still in debt and we shouldn’t pay for costly packaging or “the new feeling” when all we need is to get the job done or fulfill our need. Your need for new carpeting and washer/dryer in your basement is a perfect example of how you can get what you want without having to pay “an arm and a leg”. Since the carpet is intended for the basement, it doesn’t have to be new (or maybe, you can live without it for awhile) because you aren’t going to entertain visitors in your basement (or it may get flooded again), so online sites like Craig’s List always have bargains from people who can’t bear to throw away good stuff and are willing to “give” them away for a “song” or there’re always people in your town or city who’re having garage or yard sales for the same reason or to raise some needed cash. Be patient and look around. You’ll be surprised at how good bargains you can get because a lot of people buy all kinds of stuff without actually using them much and eventually they become clutter and it costs money to get rid of them. For example, a friend of mine wanted a costly dining set for almost $1,000, so I asked her how often is she going to entertain guests to dinner (which she said “hardly”)? I told her to look for garage sales in “good” neighborhoods and within a week or so, she found a huge solid-oak dinner table at a yard sale on her way to work selling for $100 and on her way back from work, it was still there, so she offered $50 for it and the owner was so grateful that she could get rid of it (instead of hiring others to take it away), which cost almost $900 when new. I’m not asking you to drive all over town looking for yard-sales but take different routes and drive through different neighborhoods when you’re going to work, to church or to the stores, etc. Above all, pass the word around to people you know that you’re looking for a good used carpet (no need to explain purpose) and you’ll be surprised with the response. BTW, check out church re-sale outlets, who always have un-used or hardly-used clothing, shoes, bags, etc. for a few bucks because wealthy parishioners often buy more stuff than they can use and they often give them away, so they can buy more. Washer/dryer doesn’t have to be new. If they work for a month, it will work for much longer, so look for repair-appliance shops and get your washer/dryer from them. They usualIy provide 30-days warranty and even if they don’t have one on hand, they will always have customers who buy stuff from them and they will remove the old ones, which they will repair and re-sell, so leave them your number. I bought two washers and one dryer for $60 each and everyone lasted at least five years but I would be happy if they lasted two years. Lastly, banks usually offer free balance transfers to customers with good track records or as promotions to secure new customers with good credit scores but we can’t ask for them, which is why we must stick with banks who do (like Capital One). I hope like you may be helped by my long-winded comments. May God bless your efforts to stay debt-free.

  • Report this Comment On December 05, 2009, at 7:49 AM, benitus wrote:

    Dear AndyLemore: Your comments are all true but I don't wait for any balance transfer to clear before making another transfer. I do them simultaneously because none of my cards are "maxed" out. I pay off the card with the lowest debt first. Any cash left will be spread over the remaining cards (as it's good to have physical cash repayments from time to time) or pay off the next lowest card. I can then make the balance transfers simultaneously, since I've got enough credit limit to absorb the new transfers in, while waiting for the old balance to be transferred out. If you don't have enough cards with free transfers to do what I do, then pay off only cards with free transfers first. You can transfer the debt from cards without free transfers. In this case, you should only charge your expenses to cards without free transfers, so that they can be transferred to those with free transfers. Sometimes, I make free transfers to my checking account and then I use the funds to make physical repayments to other cards. Whatever it is, I get by with managing and reducing my ridiculous debt patiently over time. I do build up my debt from time to time (which is dangerous) but again, I use my "tactics" to bring them down again over time. In fact, my family thinks that I've got some secret income somewhere, as they know I've got more debt than they can imagine but we're living as if we don't have debt. The bottomline is always to live within our means. The issue here is how to pay down our debt and NOT to use credit cards to pay for what we can't afford. With strict discipline, we can pay down our debt and still afford the things we need but we can't possibly afford everything, so we must learn to live without what we don't really need. God bless always.

  • Report this Comment On May 14, 2013, at 5:42 PM, babumpbump wrote:

    So, I'm looking at this 0% Transfer balance from Sears CC to "Consoildate bills, make home improvements, deposit them into your checking account or use them for anything else!". However, the checkc say, "Transfer other credit card balances 0.00%". I'm wondering, does it really have to be a Credit Card Balance or can I transfer the money to help pay off my Home Equity sooner?

    In my mind this makes sense. Am I missing anything? Obviously, I realize I have to pay the balance off the Sears CC a year from now, and minimum payment every month, plus still continue to pay my Home Equity down every month. But at the end of a year couldn't I just put it the Sears Balance back on my Home Equity?


  • Report this Comment On September 13, 2013, at 10:29 AM, alawrence37 wrote:

    I recently read an article about charge card funding ( and wondered if it was something like the teaser rates you mentioned. Do you know where I can find more information on that?

  • Report this Comment On September 15, 2014, at 10:17 AM, mpnomo28 wrote:

    Ok... So I'm a first timer when it comes to transferring a balance from an existing credit card (chase freedom) over to a CITI credit card. Can someone please help. What do I do now. I was approved and it said my Chase balance would be paid by CITI. Do I now cancel my Chase card?

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