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Is it possible to use balance transfers to avoid interest with major credit cards?

Can I transfer a balance between credit cards to avoid a finance charge?

  • I have two credit cards, one with a $30k limit, which has a balance of $5k at 19%. The other card has a $7500 limit, zero balance, and 13.9% on balance transfers. My card with the high limit will let me transfer in a balance at zero% for 24 months. Is it legal for me to transfer my balance to the 13.9% card, only to transfer it back, say within a month; to the $30k card which will then carry it for zero %

  • Answer:

    Assuming the two cards are not issued by the same family of banks, yes it is possible. However, read the fine print - most balance transfers come with a 2% or 3% of balance transfer fee to discourage just this sort of thing. You may also lose the balance transfer deal by zeroing out your balance on the first card - banks have gotten wise to card hopping balances and are cracking down.

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Doesn't work that way. They are telling you that 0% is 0% interest on the balance. But there's up to a 3%-5% balance transfer fee. Each month that balance transfer fee will be added to the amount of money you transfer. Within 1 year,you transfer fees will amount 48%-60%. I ran this scenario in Excel. If you keep bobbing a $5,000 balance between accounts with just a 3% transfer fee, in month 12 of your bobbing, that $5,000 balance will grow to $7,128. The CC issuer will love you to death. That's how they can afford to offer 0% interest. They get that back and more on transfers. With a 5% transfer fee, that bobbing can go to almost $9,000! It's like compounding interest.

You need to take the transfer fee into consideration. Depending on your card terms, the transfer fee can be 3% to 5%. That is a lot more than the monthly rate interest rate you are currently paying. It can also take up to 6 weeks to procress a balance transfer, so your timeline might get messed up. But the credit card can withdraw that special 0% rate. Credit card companies are onto this kind of scheme. You might get away with the second transfer but won't see a third.

In this case if you know that you will be able to pay off the $5K within the 24 months then go ahead and do it.

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