Transferring a balance to a cheaper
credit card -- a tricky money saver

Transferring your credit card balance, or balances, to a lower interest rate card can save you money.

The process is a tricky one -- there are a lot of possible fees, penalties and 'catches' to beware of lest this move actually end up costing you money.

It is also getting harder to do. Credit card companies are try to stop losing customers, and they are also trying not to gain customers who are only there to take advantage of introductory rates before they move on again.

This is one credit card move that absolutely demands you read - and understand - all of the fine print. Different card companies handle it in different ways and have a wide range of fine print containing a myriad of rules.

But just because hopping from one card company to another is harder than it used to be doesn't mean you can't do it. There are fewer and fewer super-low teaser rates for balance transfers, but there are low fixed rates offered for balance transfers (that's the card company's way of getting you to bring your balance and stay).

Key numbers
If you do not transfer to a fixed rate (or even if you do because fixed doesn't mean fixed forever) there are three figures of prime importance - the rate you are getting, how long it lasts and what it jumps to when that rate is over. With a fixed rate you may not know when it will change, but there will at least be a guaranteed period before it can change.

After you have those numbers, check out all of the related costs:

• Does either company charge a fee for moving the balance?
• Is that fee a flat sum or a percentage?
• Does your old card company charge you another fee for terminating your account?
• What fees and rates does the new company charge for new customers for new purchases?
• Will both card companies notify you when the transfer is done?
• Under what circumstances can the new company change the introductory rate it gives you for your balance transfer?

Beware of 'tiered' arrangements. These will let you transfer a balance and give you some sort of interest amnesty or super low rate for a period, and then there may be another rate or arrangement for some more time, then a third (or even a fourth) rate. The trap here is that you may start with a great arrangement and slowly find your deal getting worse and worse.

Different rates
There may also be different rates for purchases you make with your new card. For example you may transfer with no interest for three months on your transferred balance and any new purchases. Then for three months you may have different, but not too bad, rates for what's left of the balance but a higher rate for new purchases In the third and sometimes fourth tiers both rates could rise to the point where you don't have a good deal any more.

So make sure you know how you intend to pay off your transferred debt.

If you are sure you can pay it off during that interest payment holiday or super teaser rate it may be a good deal. If you're not sure, think again. If you know it won't happen, go to your calculator and work on different scenarios. You may find that if you haven't paid off enough of the transferred balance in, say a year, you're actually moving into a worse deal.

Some card company's limit how much you can transfer or how many times you can transfer a balance. Make sure you use your calculator because the more complex the transfer arrangements the more chances the movement might not be as beneficial as your at first thought.

One thing is surprisingly commonly overlooked in balance transfers - are there fees? Not only might the new card company charge you, but your old one might charge you a fee for the transfer and even a penalty fee for closing the account. They may also charge you more money to manage any money you leave behind with them if you don't transfer your total balance. Check it out, be sure!

Also be clear just how long the whole process will take, when you stop paying on the old card and start paying on the new. You don't want to find you're paying for a balance in two places at the same time, however briefly.

Make very sure too that you know under what circumstances your new card company can change the rate your transfer is being charged. Sometimes a late payment, or maybe some other obscure transgression, will automatically end your deal and bounce you into a stratospheric rate. Know every circumstance under which they can do this.