Smart balance transfer: Do the math, change spending habits


Credit Wise
Credit Wise columnist Kevin Weeks
With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

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Question for the expert

Dear Credit Wise,
PLEASE HELP ME! I presently owe $4,500 with a 25.24 percent APR. I have been offered a 3.99 percent promotional APR on that $4,500 good for 18 months. I can pay $175 per month. My credit score is high -- 700. I have tried to get my APR reduced without success because the company representative said my payments are not late. Should I accept this offer? -- MaryAnn

Answer for the expert

Dear MaryAnn,
Your present balance and your present interest rate are both very high, as you well know.  Using the credit card calculators on, I found that if you pay the $175 you say you can afford each month, it will take you more than three years -- 38 months -- to pay off this debt at your current rate. In addition, you will end up paying a little more than $2,000 in interest alone. You are right to ask for help.

And yes, I think you should probably jump at that balance transfer offer -- if you check one thing first. You don't say what the interest rate on your new card would be once the promotional period ends. Look closely at the fine print and find out what that post-intro rate, sometimes called the go-to rate, will be. If it is close to or even higher than your current rate, keep shopping. With your good credit, you should be able to find a better offer that will make this endeavor worthwhile.

For now, let's assume the go-to rate is the current national average APR of 15 percent, and that you'll be charged the typical balance transfer fee of 3 percent -- in your case, $135. With monthly payments of $175, you would cut the time to pay off your debt by 10 months, to 28 months. Better still, you will slash your interest costs dramatically.  Even after paying the fee, you'll save more than $1,600.

If you can find a way to increase your monthly payment to $260 each month, you can pay off the debt by the time the promotional period of 18 months ends. In this scenario, you would only pay about $150 in interest.

In either case, I would say it's worth it to get out from under the onerous rate you have right now.

You are probably thinking I am crazy to suggest that you pay more than what you said you can afford for a monthly payment. But I hope you will take a hard look at your monthly expenses and see if you can't carve out the extra money you will need. The more you can pay, the faster you will be rid of this debt.

I also hope that during this time you will stop using your credit cards. That is really the only way to get out of credit card debt. Make it a point to not use a credit card unless you will be able to pay offyour purchases in full each month. This is a lifestyle change that can be difficult, but is ultimately very rewarding.

Be wise with your credit!

See related: Balance transfer offer survey

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Published: August 29, 2015

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