Balance transfer credit cards can be a good deal under the right circumstances. A 0% balance transfer card can give you time to get your spending under control and pay off your debt.
With a balance transfer credit card, you transfer your high interest debt to a credit card with a lower interest rate. Then you’ll get a period of time with a low rate, ensuring each payment you make goes toward reducing principal, not just interest.
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When you sign up for a balance transfer credit card, you need a plan to pay off your debt within the introductory period, and you should avoid taking on more debt.
New purchases get charged at the regular interest rate on balance transfer credit cards, so if you can’t stop using your credit card, you’ll end up in more debt once the introductory period expires and the interest rate goes back up to 19.99%.
Best Balance Transfer Credit Cards
The best balance transfer credit cards offer 0% interest and a long introductory period. MBNA’s Platinum Plus MasterCard currently has the best offer, with a 0% interest rate on balance transfers for 10 months, and no annual fee.
Beware that sometimes there are up-front fees associated with a balance transfer. For example, MBNA charges 1% of the amount you’re going to transfer. So if you transfer $5,000, you’ll be charged $50.
Here’s a look at the best balance transfer credit cards:
|Balance Transfer Credit Card||Balance transfer rate||Duration||Regular interest rate|
|MBNA Platinum Plus||0%||10 months||19.99%|
|Scotia Value Visa*||0.99%||9 months||11.99%|
|RBC Rewards Visa Gold||1.90%||10 months||21.99%|
|PC MasterCard||5.97%||4 months||19.97%|
|Capital One SmartLine||5.99%||3 years||7.99%|
*$29 annual fee
How much interest can you save?
I don’t carry a credit card balance, but if I did, here’s how I would use a balance transfer credit card like the MBNA Platinum Plus MasterCard to my advantage.
First, I would only use balance transfer credit cards once I was certain I had complete control of my spending on both my old and new credit card. If you can’t stop piling on the debt, you’ll be in even more trouble when the interest free period expires.
Related: How To Get Out Of Credit Card Debt
Second, I would take my credit card with the highest balance and highest interest rate and transfer as much as I can over to the MBNA Platinum Plus MasterCard.
Let’s assume you carry a $5,000 balance on your standard credit card with a 19.99% interest rate. Transfer the balance to the MBNA Platinum Plus card and put $500 a month toward repaying your debt with the goal to eliminate it before the 10-month interest free period expires.
The same repayment schedule on the card with the standard 19.99% interest rate will take you two months longer and cost you $515 in interest charges (instead of $0).
Balance transfer credit cards like MBNA Platinum Plus can be used as a tool to reduce or eliminate your credit card debt. With a 0% balance transfer for 10 months, more of your money will go toward paying off the principal instead of just the interest.
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Just make sure you don’t fall back into your old spending habits and start piling the debt back on.