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Ask Bill About Credit Card Balance Transfers

January 24, 2025

Q: I have $5,000 worth of credit card debt that I’m currently paying 21.49% on and I can only afford to make the minimum payment. I saw you are offering a 5.99% balance transfer for 12 months. I know the rate is lower but how does this work to pay off such a large amount for my situation?


A: A credit card balance transfer is a financial product that charges a fee to offer you a time period of a lower interest rate to pay off a large balance. It is important to know the pros and cons before making a transfer to be sure it is the right choice for you.


Balance Transfer Pros
Consolidated Payments

You may be able to combine multiple credit card balances (especially store cards) by transferring them to one balance transfer card. Once you consolidate your credit card debt onto one card, you can focus on one payment with one due date, instead of making several payment each month and having to keep track of various due dates. This can make it easier to manage your payments


Save Money on Interest
A major benefit of doing a balance transfer is the potential to save money on interest. It’s common to see credit cards with APR’s of 28% or higher. Some balance transfer cards come with an introductory APR for a set amount of time. That way, the money you pay toward your debt is not just getting eaten up by interest but pays down more of your principal balance. You may want to have a Banker calculate a 12 month amortization for you to pay off the entire balance prior to the promotion ending.


Balance Transfer Cons
Balance Transfer Fee

Most good things aren’t free and that includes balance transfers. Many balance transfer cards will charge a fee of 3% to 8%. OC Federal currently charges 3% for our balance transfer promotion.* Using your $5,000 example, a 3% fee would be $150 to complete the transaction. Consider that added cost before you transfer your balance to make sure you are still saving money.


Temptation to Spend with Lower Interest
If you are looking to do a balance transfer, you’re likely hoping to pay off debt and save money on interest. But you may need to address the root issue of overspending in the first place. Having a new card with lower interest can be a tempting way to continue the credit card cycle. Consider closing the credit cards that you transferred. Make an appointment with a Banker and discuss how to manage your money for the long run to include savings and budgeting.


Credit Score Requirements
In order to get approved for a balance transfer credit card, you typically need good credit scores to qualify. Your credit scores will also help determine if you are approved for the best APR.
Rate After the Promotional Period
Since you can only make minimum payments, consider the interest rate after the promotion ends, usually 12 months. Many cards will charge interest on the entire $5,000 balance if it is not paid off within the 12 months and may charge interest even higher than the 21.49% you are paying now. OC Federal currently has current standard rates between 10.99% and 17.99% so a standard rate would still benefit you.**
If you would like to discuss further and have a Loan Officer run the numbers, call the Loan Zone at
(216) 478-0067. Our experienced Loan Officers can help you decide if a balance transfer is right for you. We are here to help you save money on your loans
and credit cards.

*APR = Annual Percentage Rate. Subject to creditworthiness, OC Federal Credit Union lending policies, and membership eligibility. The 5.99% APR is a promotional rate on balance transfers from another financial institution made between the promotion period October 1, 2024 through February 28, 2025. Promotional APR of 5.99% is valid for 12 billing cycles from the date of first qualifying transfer. The APR on all other transactions and balances on your account will remain at the applicable rate in accordance with your credit card agreement. Other fees may apply. The maximum APR is 17.99%. The interest rate on qualifying balance transfers will remain 5.99% APR unless the account becomes delinquent and/or over the limit. All payments will be applied to the highest interest rate first. Existing OC Federal Credit Union credit card/loan balances are not eligible for the promo rate. All balance transfers made during the promotional period will be subject to a fee of 3.00% of the transferred amount. Minimum balance transfer amount of $500.00. All promotions are subject to the purchase of one $5.00 membership share required to be maintained in your share savings account. Reward points and/or Cash Back will not be awarded for balance transfers. OC Federal Credit Union may discontinue or modify this offer without notice.
**Annual Percentage Rates (APR) range from 10.99% to 17.99%; and subject to change without notice. APR is variable and based on your creditworthiness. Standard balance transfers will not have a fee. Promotional fees may vary. Other fees may apply. See fee schedule for additional details. Pledged Savings Accounts will continue to earn dividends.

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