Hi. I am debating transferring a credit card balance and need some help to push me along. I got an offer from an old credit card I have a zero balance on to transfer a balance and use a 1.99% Apr for the offer. It seems like a no brainer because my current credit card I have a 3,000$ balance on has a 10% apr. However, the new card is going to CHARGE me a transaction fee of 4% for the transfer. My question: Is it still worth the trouble?
Paying down the debt is not possible right now because of my student loan payments. But my goal is to pay down the 3 grand in 6-9 months because I now have a roommate and will give most of her rent payment $450 a month as a credit card payment each month until the debt is paid off.
Please help me decide on the math and tell me your honest opinion if its worth the transaction charge and go ahead with the transfer.
Thanks so much for your time.
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Math says transfer is less debt. HOWEVER… if you are late on any payment, the new card (the one you transfer to) will max their APR. You need to find out from their paperwork what that max will be. Murphy says max APR will probably get applied unless you are totally anal about making that payment on time.
Now… if it were me. I would not do it because this is not a perfect world and *late* happens. I would pay off the existing card at 10% as fast as I could. Even if I had to sell something or eat beans and franks for a few months. Then I would cancel the card and roll the money I was paying on the card (ie your $450) to the student loan (in addition to what I was already paying on the student loan) and pay that off early. Then I would do a debt-free happy dance, celebrate with friends, and not get into any more debt!
Several things to consider. First is that 4% transfer fee. But it might be worth it to lower the interest rate.
Read all the details of the special offer. They tend to have lots of gotchas. Some require a certain number of new purchases each month. The new purchases accrue interest at the regular rate. All you payments will be applied to the lowest interest rate first.
Your minimum payment may be higher. Your minimum payment might be 2% or 3% now but the special offer transfer may require a 5% minimum.
You also must be disciplined enough not to run up the paid off credit card and you want to pay off the balance as quickly as possible, even if the rate is low. These special offers are still subject to changes in the terms, even if the rate is for the life of the transfer.
I am going to give you a third option….
Here the goal is to keep your credit score up. For that you only ever use the maximum of 30% of a credit card’s balance. In your case I would say transfer half of the first cards’ balance onto the “empty” card and pay them both off asap.
Your credit limit has increased with the second card… (don’t cancel any of them) but you want to show that your available credit is way up and that you hardly have the need to use it.
Get both cards paid off then use them sparingly for $20 a month or so.
And watch your credit score rise…
If you go for the deal, make sure the bank where you want to transfer it to pays off your old credit card. If you write the check yourself, you probably will not get the low rate.