Credit Card Balance Transfer
Interest Rates (Photo credit: 401(K) 2012)
In this post I show you how using a Credit Card Balance Transfer helped me to build my credit score and improve my financial situation. About a week and half ago I decided to do a credit card balance transfer with my new Credit Union. I knew my credit score had gone up recently and I wanted to take advantage and see if I could get a lower interest rate than what I had on my MasterCard credit card, which is 29.99% APR. This MasterCard was the second card I had ever received and at the time my credit history wasn’t great due to not having much history at all. So did a Credit Card Balance Transfer help me? Well it helped me in a number of ways:
- My Credit Score jumped up about 7 points.
- It provided me with an additional line of credit with about a $2500 limit.
- The new credit card has an interest of only 6.5% on the transferred balance.
- New purchases have a 6.5% Interest rate for the first 12 months and a 11.9% interest rate thereafter.
- My credit balance ratio to available credit limit improved. From 914/950 = 96.2% to 914/2500=36.5%
- This makes me more appealing to lenders when I can show that my use of my available credit is low in comparison to what is available to me.
- This allows me to start a positive history of lending with my Credit Union. This will help when I try to get a loan later for my first income property because I will already have a positive history with them.
Credit Card Balance Transfer Fees
Sometimes there are hidden fees associated with balance transfers so beware of them. Fortunately for me I got a $0.00 Balance Transfer Fee and a $0.00 annual credit card fee. So it was a win-win situation for me and my Credit Union. They got my business and I a great deal. As a plus I don’t have to make a payment for two months, but if I pay it off prior to my due date which is in two months, I suffer no interest. I’m was going to pay off the debt in full within a month anyway so, again, it’s a win-win.
Research@Intel Day: Exploratory Research (Photo credit: Josh Bancroft)
Most people see debt as a negative and it is depending on how you use it. As always research anything before you commit to anything. I asked so many questions the representative with my Credit Union complimented me on both how informed I was and my inspection of what I was getting myself into. I had two cards she wanted me to do a credit balance transfer for, but I was already getting a 0% interest deal on that one so I didn’t. You should always be careful not to get stuck in Credit Card debt because you made a poor decision. However, if you use credit wisely you will see that it has some significant benefits and they are:
- You aren’t being taxed on the money you borrow. This is only positive if the money you borrow makes you more money.
- You can use money interest free if you pay it back before your next bill and suffer no interest.
- Your ability to remain “financially flexible” to make financial investments is heightened due to you not having to go get a loan, which takes more time.
- While you are on the hook for repayment of debt borrowed, you are not risking your own money. You get to use someone else’s money to invest, but reap the benefits from.
For those of you who need to see the numbers try this Credit Card Balance Transfer calculator below. If you don’t have your numbers handy you can use mine below:
Budget Guy’s Balance Transfer Info:
Amount To Transfer: $914
Current interest rate (% APR): 29.99%
Balance transfer fee (%): $0
Introductory interest rate (% APR): 6.5%
Introductory rate period (months): 12
Final interest rate (% APR): 11.9%
[calc id=2867]
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