Why doing it?
The main reason people do that is to lower the interest rate on their current credit cards. That comes in handy especially if the balance is very high. Thus, you will pay more to reduce the credit card balance and less to pay interest.
Negotiating Your Transfer Fee
However, there is a price to pay – transfer fees.
Even though balance transfer fees are paid only once (when the new card is issued), they could be hefty. Sometimes they are so high that the new interest rate does not justify the transfer. More of your payment will go toward reducing your credit card balance instead of towards paying interest
This is a short guide on how to negotiate a low balance transfer fee.
This will be your first homework – comparison. Before you start negotiating, you need to be well prepared and of course, well informed. Research the industry; check out other banks and lenders and the conditions they offer. Competition is fierce, therefore you might find someone who offers much lower rates than your current ones. Use that information to press your bank when negotiating.
Be on the lookout for future promotions. If the rate is really good, one or two months of waiting are worth it. Sometimes credit card issuers can offer up to 18 interest -free months. Do not hesitate to change the credit card issuer if another one offers better terms.
Time For Calculations
After you have compared fees among credit card issuers and decided on the best offers out there, you have to sit down, take out the calculator and do the maths.
How much will you save?
Ok, the first thing to do is see how much you are eventually going to save if you make a balance transfer. When computing, use the annual percentage rate rather than the stated rate. The latter is the rate with which the bank attracts you, and the former is the actual amount of money you have to pay in interest.
Compare the result to your current credit card and find out how much you will save in the event of a balance transfer. Then see how much will the transfer fee cost. If there is a significant difference, then you might proceed with the next steps
Sometimes, people have several credit cards with different balances and at different rates, which makes it confusing to owners.
One of your cards is $5,000 at 8.5%, another one is $1,500 at 11% and a third one is #3,500 at 10.25%. Don't despair, often lenders might fix your transfer with a single fee, which is usually between 2-3% of the balance amount.
Knowledge Is Power
Whoever said that knowledge is power was right. Think that way – a balance transfer means a new contract with the issuer of the credit card. Contracts must be read carefully before signed, especially the fine print.
Some of the very important things you have to be aware of are:
- The spread between the old and the new interest rate
- Is there any grace period and how long
- Is there a universal default option
Also, you should carefully do the maths – is the balance worth the efforts, time and money spent on fees? If the balance fee is very high and the interest rate (when you calculate it!) cannot make up for the difference, is it worth it? How does this benefit you? How long are you going to repay the debt?
Let's assume that you have done extensive research and found out the best offers on the market. Also, you have calculated that you would definitely benefit from the balance transfer in the long run. The next step is to go to your future (or current) lender and negotiate the terms of the balance transfer and the fee.
If you are a diligent payer and have been a client for a long time, mention your loyalty and also solid payment history. This is always very important when determining the new terms.
In case you are a business owner and have used the bank for many years, mention all the business transactions and processes you have made. You know that banks charge all of them, so they will benefit from you in the future.
Maybe you have had a card in the past but no longer have. Surely, the bank will try to attract you and “sell” you one of their credit card promotions. Even if they charge you 2%, they will make something out of you as a client. They always make a profit in the end. The point is to take advantage of the situation and get the best terms and conditions and a fee waiver.
Make a list of all the things you would like to achieve – and make sure you get it.
Waive The Balance Transfer Fee
The next step you have to do is try to make your bank waive the balance transfer fee.
Again, use your payment history and all the transactions you have made. Another thing you can experiment with is your credit score. Тhere is no bank that will neglect a stellar credit score and this could be one of the aces up your sleeve. Not only will the bank waive your fee but also give a good interest rate on the new card if you have a good credit score.
Don't forget: Sometimes banks are not willing to give you the terms you expect. Tease them and tell them that this or that bank offers you these conditions.
Occasionally, banks do not accept to waive the transfer fee. If this is the scenario, you can try to negotiate a lower fee – 100$, for example. Keep in mind that balance transfer fee can be up to 3% of the balance.
Patience is The Key
You have to understand that patience is really important in the process of negotiating.
Maybe the person you talk to is not very experienced; you have to right to talk to a manager or a supervisor. When we talk about banks and offers, nothing is fixed. You can discuss and try to change all the conditions in your favor. Even if you fail to waive your balance transfer fee, you might end up getting some great conditions.
All banks have some great promotions on balance transfers. Before you decide to consolidate your debt, you have to appraise the possible benefits and drawbacks in the long run.
Will the new rate justify the balance transfer fee? How much of an impact is the balance transfer going to have on your credit score? Those questions you have to answer before you make that decision.