Nifty Credit Card Transfer Trick

As you know, I am not a fan of credit card debt.  But recently I found myself advising a friend to apply for a low interest credit card.  He’d had to make some equipment purchases over the first few months of being hired at his new job.  He really had no other choice but to put it on his only credit card, which unfortunately happened to accrue 19.5% interest. This amounted to over a hundred dollars of interest every month.  We talked, and since he was anticipating a very large bonus check headed his way guaranteed in three months, I recommended either swapping the amount to an introductory credit card, where there is no interest for the first 6 months or year, or just taking a bank loan out at 6%.  Here’s his credit card story…

Mac is fresh out of college and just started his first job.  He graduated and moved to his new job, putting all the moving expenses on his crazy-high interest credit card he opened in college.  Without proof of long-term employment, he couldn’t qualify for a bank loan for the amount he needed to pay off.  Mac didn’t want to put anyone else in financial jeopardy just to save interest, so he did not want to get a co-signer on a loan.

Credit Cards
Credit Cards (Photo credit: 401(K) 2013)

Luckily, he did have a good FICO score so he was able to open a new credit card which offered him a rate of 1.75% to transfer the balance. He made payments until he got his bonus, and then paid off the full amount.  Notably, this was not a free fix, but a one-time transfer fee saved two months of interest.  He just really needed credit at the time, and had a tangible plan on how to quickly pay off the debt.

I wanted to bring this case-example to my readers as a temporary solution that can be used by others:  you can transfer a credit card’s balance to a new card with an introductory offer of no interest to save on interest costs.  If you are able to responsibly pay back the full amount the new card before the introductory period is over, this is a pretty nifty trick.  Double check your math to make sure it’s worth the transfer fee, but for large amounts on high interest cards, it frequently is.  This was also a very time-consuming endeavor, between applying for a new card, being approved, transferring the full amount, and then making payments until he could pay it off with his bonus.  There were lots of steps that could go wrong, and in all fairness, I want to make those explicitly clear.  Mac also took a leap of faith that the bonus would come, that the first job out of college would work out, and if it didn’t, he was prepared to pay off the interest on the new card after the introduction period.  But still, in the odd case of temporary debt, you can transfer credit card debt and potentially save interest fees.

Would you ever transfer credit card debt to avoid interest? 

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7 thoughts on “Nifty Credit Card Transfer Trick

  1. Back when I was first beginning to figure out how much debt my then-husband had quietly accrued while I was navigating my world in a fog, I happened to enter a brief spot of light in which I woke up enough to look around and discover that he had racked up $10,000 worth of debt on two credit cards.

    This was back in the day when a dollar was worth something. By the time I learned about this, all he was doing was making the minimum payment — he couldn’t pay down principal, despite a very fine income. And even back then, credit-card interest was around 18 percent.

    We’d had the debt discussion before; I had almost left him about ten years before that, when I made a similar discovery. At that time I’d explained to him that I deeply disliked being in debt and that I resented his attitude that I was incompetent to handle money when in fact he was sinking us up to our community nose in debt. So he already had the fear of God put into him — that’s why he was sneaking around this time.

    So, when I demanded that he take out a second on the house, with a much lower rate on interest that would be deductible in the same way a mortgage is, he took me seriously.

    He was a VIP customer at the bank and had a personal banker there. To my utter astonishment, she said to him that she didn’t understand why he should take out a loan against the house to pay off the Visa & Mastercard bills, because, said she, “ten thousand dollars isn’t a large credit-card debt.”

    In today’s dollars that 10 grand would translate to a little over $24,000. A mere bagatelle, eh?

    Anyway, he went ahead and got the loan against the house and soon paid it off. That didn’t stop the problem long-term. But in the short term, it at least got us under the wad of debt du jour.
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