Balance Transfer Wisdom

Thursday 1 March 2012 - Filed under Practical Money Advice

Balance transfers cover a wide of actions.  Credit card balance transfers are different than balance transfers for trading stock trading accounts.  Many stock trading companies are willing of offer big bonuses for people who transfer their money to new accounts.

 

Credit Card Balance Transfers

Credit card balance transfers are a great way to save money and optimize your monthly spending.  If you commonly carry a balance on your card, then it may be best to find a card with a lower balance.  There are many cards that offer a zero dollar balance transfer fee in order to entice new customers.  These cards will offer introductory APR rates that are very low.  If you expect to be able to pay off the balance within a year, then these low introductory rates can be a great deal.  By paying the intro rate instead of the normal 15%-20% you will be able to save a serious amount of money and pay off your debt much quicker.

Another good reason to transfer your credit card balance is to find a take advantage of a better reward card.  There are many different types of reward cards.  The cash back rates are commonly between 1-3%.  If you can find a new credit card with a lower interest rate and a higher rewards rate then you can end up saving a serious amount of money.

When transfering your balance to a new credit in most circumstances you will not want to close the old credit card.  A large portion of your credit score is determined by the amount of credit you are currently using relative to the total amount of credit available.  By maintaining your old and new credit cards, you are able to increase your total amount of credit while decreasing the amount credit being used; thus increasing your credit score.

Trading Account Balance Transfers

When you have a trading account [ie 401k, roth IRA] and you want to transfer all of the funds from the account usually there is a fee ranging that is at least $20-$100.  Many times when you open a new trading account they are willing to offer you a full or partial discount based upon the amount of money that you are transferring.

Be careful when considering an account balance transfer as there can be serious tax consequences. 

If you are forced to sell off certain assets and then transfer the proceeds, then you may be forced to pay capital gains tax on the proceeds.  Before transferring your funds it is very important to examine your tax situation and see what capital gains taxes you may be forced to pay.

Savings/Checking Account Transfers

Transferring funds between savings or checking accounts is quite easy.  Cash can be withdrawn from a local branch and then deposited in the local branch other other bank.  Also, you can directly transfer the funds between the accounts via a ACH or a wire transfer.  Wire transfers are usually more expensive than ACH transfers.

For international transfers, a wire transfer is more common than an ACH transfer.  The ACH clearing system can differ from nation to nation and as such not all banks can accept ACH transfers from other countries.  Wire transfers are easier for international transactions but they are often more expensive than ACH transfers.

When transferring funds between bank accounts it is very important to ensure that the account balance stays above zero.  Many banks will place a monthly fee on accounts that have less than a couple thousands dollars.  If you have zero dollars in your account and then are charged the monthly maintenance fee, your account balance will be negative.  Accounts with a negative account balance are charged a strong penalty.  So remember, if you transfer all of your funds from a bank account you must watch the daily balance to ensure that you do not end up with a negative balance and lots of unnecessary fees. 

 

2012-03-01  »  Juan