How Do Balance Transfers Work?

Cjarma01 on 25/08/2015 - 09:46

Hi,

Just wanting to know a little more detail regarding balance transfers.

I have a 28 degrees Mastercard and this month will have spent 5K on flights etc. I want to keep the 28 degrees card as i will be going to the US in a couple of weeks time. Can I balance transfer the current amount to a deal which enables no interest etc for X period, but than continue to use my 28 degrees card?

Or does the balance transfer effectively mean closure of that card.

Additionally, any pitfalls with balance transfer. In my case I just simply want to transfer the balance for an effective no interest loan for XX months. I don't want to purchase anything additional on this new card during that period. Just want free money for XX months - I would rather it sit in Mortgage.

Any help would be much appreciated.

Thanks Team.

Financial

Comments

  • airzone on 25/08/2015 - 10:47
    +1

    The new credit card company will issue a cheque to the old one. The credit on the old one will be freed up.

    Some things to think about though:
    1) You will be increasing your credit by at least $5k on another card to transfer without reducing your 28 degrees card. It is then very -easy- to max out your 28 degrees card and then you end up with 2 maxed out cards instead of one.
    2) Your new company may require the closure of the account on your old company, as part of providing you credit. Also, some will only offer a max % of transfers (e.g. I think Citi is max 80% of your credit can be used by a transfer - therefore instead of a $5k card, you probably need a $7k card).
    3) After the free interest period runs out, the balance will normally revert to a crippling cash rate. Then you end up bouncing the balance around different cards.

    IMO, while this can be used effectively, it's a slippery slope. Be careful.

  • Cjarma01 on 25/08/2015 - 11:04

    Thanks Airzone,

    I always have just paid the full amount each month to effectively have free money for the month with the actual money sitting in my mortgage reducing the interest for the month and than just pay balance before due date. Your point about the new company requiring clossure of old company is what I was worried about because I want to keep the old card too. I will look at options available and ring around to see which new issuers require this.

    Thanks.

    • airzone on 25/08/2015 - 13:35

      It's dependent on your financial situation, not a specific card company.

      Put it this way.. If you have a $5k card, but you have the financial power to have a $20k
      card, then the new credit company won't care.. But if you only ever have the financial power to have a $5k card, then they will probably want you to get rid of the old one.

    • danield on 25/08/2015 - 15:00

      I use the Citibank Card for Balance Transfer and they deposit the money directly into my mortgage, from there I can withdraw it and put it anywhere I want. Don't know about other banks, but so long as its a mortgage and not a saving account and you have redraw facitlites on your mortagage then its easy as pie.
      They give you 80% of the card limit eg 10K card limit they will transfer 8K to you.

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