You might have heard about credit card balance transfers, but what does that really mean and why is it valuable to you? If it seems like you’re moving debt from one place to another, that is correct, but it is with a positive goal in mind. To truly understand the benefits of a credit card balance transfer, we’ll have to look deeper:
How does a credit card balance transfer work?
A balance transfer is moving the balance of one credit card to another credit card with the goal of saving money while you’re trying to pay off the said balance. To reach this goal, the new credit card has to have a lower interest rate than the current credit card. You’re basically paying off one credit card with another credit card. Think of it as you would refinancing your car or your home – you’re getting a new loan that is better than the old loan to save you money.
Balance Transfer Promotions
In order to truly take full advantage of a balance transfer you should look for a new lender that is running some type of promotion, such as a 0% APR on balance transfers for a certain period of time. The catch with this is, you want the “certain period of time” to be long enough for you to pay off the debt before the interest rate changes. After the promotion is over, you will have to start paying the new interest rate on the remaining balance.
That being said, if your new card has an interest rate of ~10% and your old card had an interest rate of ~22%, you’re still saving money on interest, so you’re still helping yourself in the big picture.
Why should you do a credit card balance transfer?
So how does a balance transfer truly save you money? There are a few different ways that a balance transfer can be helpful:

Get out of debt faster
Since the interest rate is lower (or non-existent) on your new card for the time-being, much less of each payment will be going towards interest. This will allow you to take bigger chunks out of your debt with each payment instead of feeling like you’re going nowhere because so much of each payment is being eaten up by interest. If most or all of your money is going towards the debt, and you’re still making the same payments each month, you will be debt free much faster.
Spend less money on the same amount of debt
Paying on your current debt, plus ~20% or more interest each month can really add up. If you look closely at a statement you’ll see how much of an interest charge is being added every month to the balance you already owe. If you choose a balance transfer that has a no interest or low-interest promotion, nothing or very little is being added to your balance, and you save money.
Consolidate high-interest rate debt
You can also use a balance transfer to combine multiple different loan payments into one, up to your credit limit. This will save you money by allowing you to pay less interest, and it will also save you time and headache by consolidating multiple monthly payments into one. This doesn’t even have to be just credit cards – you can also sometimes transfer student and auto loans to a credit card depending on the balance and your credit limit.
Tips to make the most out of a balance transfer
Have a payment plan
Since most promotional balance transfer rates only last for a certain period of time, try to pay off your existing debt before the interest rate raises. Make a payment plan to figure out how much you will need to pay monthly to be debt free by the end of the promotional period, and stick to it!
Be mindful of new purchases
You may be tempted to buy more on the new card since it has such an attractive lower interest rate. Be careful of the amount of additional purchases you put on the card, or you could end up sabotaging the whole plan to get rid of your debt by piling on more debt.
Also try to stay away from making purchases on the old card now that it has a freed up balance. If you do this, you may dig yourself into much deeper debt that will cost you even more in the long run with no balance transfer options available to help get you out.
Get yourself out of credit card debt with a balance transfer at Patriot Federal Credit Union
If you’re ready to make the move and help get yourself out of credit card debt, Patriot can help! Learn more about our credit card and great balance transfer promotion on our website, by stopping in to one of our 9 branches throughout Chambersburg, PA, Waynesboro, PA, and Hagerstown, MD, or by giving us a call at 888-777-9982. Patriot is excited to help you on your journey to being debt free!