In our blog, what are common fees for balance transfers, we explained that most credit card companies charge a percentage of the balance transfer amount without applying a cap. For example, if you transfer $1,000 and incur a 3% transfer fee, the amount that will show up on your credit card will be $1,030 (principle transfer of $1,000 + $30 transfer fee). Three percent is a common transfer rate across issuers. The only Bank that I'm aware of with a cap on credit card balance transfers is Chase (e.g. $75). Typically, the amount you owe per month on your transfer will be 2% to 3% of the transferred balance.

So, if you transferred $10,000 using a zero percent introductory transfer rate, your first monthly payment would be around $258 ($10,000 transfer + $300 transfer fee = $10,300 x 2.5% = $257.50). Once your introductory period expires, your monthly payment should then revert back to an amount significantly less than the 2.5% because you are now being charged interest which is when the credit card company begins making money.

Cash advances on your credit card should be avoided at all costs. The primary reason for this is the extraordinarily high interest rates (average is around 21%) that are charged on this type of transaction. Not only do you begin incurring a high interest rate right away, but you are also charged the same type of fee that you are with a balance transfer. Therefore, on a cash advance of $10,000, your first month's interest will cost you $175. If you look to pay your interest balance off each month, your first monthly payment would be $432.50!

If you qualify and need immediate cash, call your credit card company and request balance transfer checks. Most credit card companies now offer these with monthly statements. If your next statement includes one of these, you might want to tear one off for a rainy day. This way, you can use the funds to pay off other credit card balances or fund something else, like a downpayment on a car. If you don't qualify, you may want to consider a loan from a friend or contacting your local bank.

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