Apply for a balance transfer and save! If you carry high interest credit card balances, balance transfer credit cards are the ideal solution for consolidating your debt and paying it back at a lower interest rate. The lower your credit card interest rate, the more of your payment is applied to the money you owe- and the faster you pay it off. Balance transfer credit cards offer a low interest rate for the life of the balance, or 0% APR for transferred balances for a specific period of time ranging between three months and 24 months.  Look for a balance transfer offer with a low balance transfer fee.

Step by Step Balance Transfer Guide

If you currently have high interest credit card debt, a balance transfer offer with low or no interest can look like a dream come true!  Consolidating higher interest debt to a lower interest card is a good solution to save money, but you do need to make sure you will benefit from the balance transfer by reading the fine print and checking some basic math to ensure you will benefit – not all balance transfers are a good deal.

Here’s a step by step guide to transferring credit card balances and making sure you’re getting a good deal in the process:

Step One: Examine the Balance Transfer Fee
The days of balance transfers without a fee are long gone!  Almost every balance transfer offer will now charge a transfer fee of 2 or 3% of the transferred balance, up to a maximum of $50 or $75.  What you want to look out for are balance transfer offers that include unlimited fees – in other words, if you’re transferring a large amount of money and the card is charging a transfer fee of 3% with no maximum limit – you could pay a couple hundred dollars to move your money to the new card!  Before signing up for a balance transfer, figure out how much the transfer fee is going to cost you.

Step Two: Understand “Preapproved” and your Credit Limit May Differ
If you receive a preapproved offer for a balance transfer in the mail, you may be surprised to learn that after you apply, your credit limit is different from the preapproved offer.  The problem with this is you may have been expecting a higher limit that would accommodate all of your existing credit card balances, but the actual limit isn’t high enough to transfer everything.  You can still transfer as much as the card does allow and receive the lower interest rate on that part of your debt; but the remaining debt is still charging you a higher interest rate, plus you negatively impacted your credit score by increasing your total credit limit.  When getting ready to apply for a balance transfer offer, just keep in mind it may not work out exactly as you planned and if you’re going to be looking for a mortgage or car loan in the near future, it can actually cause problems getting new credit.

Step Three: Look For the Best Interest Rate
When comparing balance transfer offers, look around for the best rate you can qualify for.  While most balance transfer interest rate offers are promotional in nature, and only valid for a certain amount of time – you can still get the lowest rate possible and for the longest amount of time.  If the balance transfer interest rate is only good for 3 months and you know it will take you longer than 3 months to pay off your balance in full, look for offers that are at least 12 months to get the best value out of the transfer.

Step Four: Transfer Highest Interest Balance First
If your new credit card does not have a high enough limit to accommodate all of your existing debt, transfer your highest interest balances first.  Pay the minimum amount each month on the new, lower interest credit card while you focus on paying off your higher interest debt first.  This will decrease the total amount of interest you’re paying.  The sooner you pay off the higher interest debt, the sooner you can tackle the transferred balance.

Step Five: Do Not Make New Purchases with Your Credit Cards
Even if your new credit card offers a low promotional rate on new purchases or cash advances, do not use it to make purchases after you transfer your balances to the card. Don’t use your old cards, that you just transferred your balances from, either!  The idea is to get out of debt and not just get a higher credit limit to continue spending.