Keeping You in The Know: Balance Transfer Day

With the rise of the Occupy Wall Street movement spreading to major cities all over the country, mass protests have ensued with a primary aim at major financial institutions.  Many of you may recall ‘Bank Transfer Day’ which prompted consumers to close their checking accounts and switch to a smaller bank or credit union.  According to CSMonitor.com, this initial protest prompted nearly 650,000 to leave their major banks for smaller institutions. This nationwide demonstration was created in reaction to the announcement that major banks were going to charge new monthly convenience fees for checking accounts in the beginning of 2012.  In return, America’s biggest banks received major backlash and negative publicity and eventually forced those same banks to revoke their plans to implement monthly fees.

Another growing frustration that major banking and lending institutions are forcing on consumers are high interest rates. In response, this past Sunday, December 11, 2011, was marked as ‘Balance Transfer Day’ which was sponsored by Music For Change: Financial Literacy Initiative.  This protest prompted consumers to switch their current credit balances from high-interest cards to lower or zero-rate cards.  This time, the initiative seemed to have additional motives besides standing up for the common person.  An Associated Press pointed out in a recent article that the creator of the Facebook page for ‘Balance Transfer Day’ is also an editor at Credit-Land.com, which is a website that profits when a person applies for a credit card.  This information wouldn’t be that big of deal if it had been disclosed but it wasn’t – which has led many to believe that the Balance Transfer Day is no better than the schemes and ploys that creditors are forcing on consumers.

None the less, ‘Balance Transfer Day’ sparked an opportunity for people to reexamine their financial situation and how they can cut costs and pay off their debt.  If you missed out on ‘Balance Transfer Day,’ here are a few tips to help you decide if a balance transfer is a smart money move for your personal finance situation:

• 0% interest rates are only offered for a short term basis as the introductory period – usually 6 months to 21 months.
• By transferring a credit balance from one high interest card to a zero interest card, consumers have the chance to pay down the principle portion of their credit card debt faster or at least prevent interest from piling up.
• Balance transfers should only be done in a strategic manner in an effort to get out of credit card debt.
• Read all fine print before doing a balance transfer – some lenders charge a balance transfer fee typically between 3 – 5 %.  That means for every $1,000 you transfer, you may be paying $30 as a one-time fee.
• Debtors who expect to need at least six months to pay off their credit card debt are usually good candidates for a balance transfer.
• Consider long-term interest rate that kicks in after the temporary zero or low percent interest rate expires – this may end up costing more in the long-run.