Credit Card Balance Transfers

Credit cards are made for responsible and disciplined people. Credit cards are made for irresponsible and undisciplined people.

What do I mean by this? If you are self disciplined when it comes to money you will be able to manage your cards, improve your credit score, and receive other card benefits. However, credit card companies profit from undisciplined people who fall into debt. One of the ways to avoid this debt trap is a balance transfer.

A balance transfer is one of the benefits offered by some credit cards. As defined by,

“A balance transfer is the process of transferring high-interest debt from one or more credit cards to another card with a lower interest rate (preferably 0%).”  

Essentially, you are using one credit card to pay for the other, but you are doing so at a much lower interest rate.

Consider the example below: This is Kofi trying to play catch up on his high interest credit card payments! It can be overwhelming.

Kofi has a $10,000 balance on his credit card and is paying back the balance at a 25% interest rate.  He does some research and finds a quality card that gives him a 0% promotional interest rate on balance transfers for 1 year. Kofi gets this new card, transfers over his $10,000 balance from the old card, and will pay 0% interest on it for a full year. Essentially, Kofi gets to hit the reset button and now has 1 full year to catch up on his card payments before interest starts to accrue again. He can save himself a lot of money if he remains disciplined as a Clever African and pays off the card within 1 year. On the flip side, having to manage multiple credit cards could be problematic for him if he remains undisciplined.

After catching up on his payments and using the reset ability provided through balance transfers, Kofi is now making payments at a manageable pace.

Important considerations when making a balance transfer:

  • Promotional Period: Some balance transfers can range from 6 – 18+ months
  • Promotional Interest Rate: Some promotional rates can range from 0% to 10%.
  • Balance transfer Fee: This fee is often 0% to 5% of the amount you are transferring. It is something to consider, but this fee can be negated by the money you are saving on interest.

With balance transfers, the key is to be able to pay off what you owe within the promotional period. Remember, better cards and better balance transfer offers are often given to those with better credit scores. Consider all your options and do your research to find out what you qualify for.


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