Does Transferring Debt from one Credit Card to another Save Money

In August 2007, a fellow named Joseph Morse wrote a book entitled “How to Take Advantage of the People who are Taking Advantage of You (Credit Arbitrage).”

A strange title indeed. But the book highlights what many people already suspect. Taking advantage of offers from credit companies can possibly better your personal financial picture.

Many credit card companies offer you great deals with the hope that if they secure you as a customer, you’ll be forever loyal. Or they assume you’ll be too lazy to transfer cards once you’ve charged a few items.

What they don’t expect is that you – the customer – will beat them at their own game.

No matter how you look at it, transferring your card balances to take advantage of the best rates can definitely save you money.

Here’s how it works.

Say you have a $12,000 balance with your current credit card, and your APR (Annual Percentage Rate) is 14.99%. At that rate, you’re paying $996 per year just in interest charges. If you’re able to find a card that has an APR of 8.99%, you’ll pay just $592 for interest charges for the year, resulting in $404 in savings. That’s an extra $404 that can be applied to your credit card balance, helping you to pay off your card more quickly.

If you can find a card with a 0% APR promotional rate, you’ll save even more. Transferring credit card balances becomes very profitable if you’re able to consistently find cards that offer 0% promotions.

Let’s take that $12,000 credit card balance again. If you continue with your 14.99% APR and pay the minimum payment of approximately $240 per month, it will take you 79 months to pay the card off. You’ll also pay a hefty $6800 or more in interest charges over that time period.

Let’s assume you’re able to transfer your card balance to a 0% promotional card at least once (or possibly two or three times), and pay the same $240 payment. You’ll pay your balance off in only 50 months. And don’t forget you will have saved that $6800 of interest charges.

Transferring card balances will only work if you follow the golden rules of credit card shuffling.

1. You remember to transfer an existing balance before the promotion expires. There’s just no way around it. You must transfer the balance before high interest rates take hold if you want to save money. Taking advantage of a new credit card promotion can take some time, so you’ll want to start shopping for a new card at least two months in advance.

2. You keep your payments current. If you’re even one day late on your credit card payment, the card company has the right to increase your rate to the one stated in your contract. A great way to avoid a possible late payment is to have your payment automatically deducted from your savings or checking account.

3. You don’t add to your card balance(s). It’s difficult to get your credit cards paid off if you’re adding to the balance each month. Curb your spending to maximize your profits.

If you’re trying to pay off debt (or even trying to lower your minimum payments), transferring your credit card balances to take advantage of special offers just makes sense. Or you could say it makes “cents,” as it is one additional way to make the most of your money.