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FiDeals: The Right Way to Transfer a Balance

Thanks to our credit card guru, Dave Hanson, for pointing us in the direction of a great balance transfer offer from PenFed, the street name for the Pentagon Federal Credit Union.

In a time when credit is tough, Pentagon Federal Credit Union is offering a 2.99% APR on any loan or credit-card balance you transfer to any of their credit cards for the life of the balance. There is a 1% fee with a minimum of $10 and a max of $100 and it costs $20 to join the credit union (anyone can). The offer expires on June 15. You’d have to join today, open the card tomorrow, and get the balance transfer done by the 15th. It’s tight, but so is credit right now.

Dave has more details here. Read on to hear our take on it.

If you need some debt relief and qualify - and NEVER PUT ANYTHING ELSE ON THE CARD - it’s worth it. If you open an account and transfer $5,000 over to a PenFed card, you will pay $70 upfront and 2.99% going forward.

Compare this rate with American Express’ Blue cards which offer 4.99% APR on balance transfers for the life of the balance with a 3% fee on each balance transfer ($5 min./$99 max. per transfer) and USAA’s Platinum card with a variable rate starting at 6.75% and a 3% fee up to $75. Some Citibank cards with offer 3.99% APR for life, but have a 3% fee with no max.

Right now, credit availability is tight and interest rates, while at historic lows, are poised to begin rising again in the coming months. A credit-card balance transfer is a good option for accessing low percentage rates, as long as you can meet the minimum payment (anywhere from 1.5% to 4% of the outstanding balance).

If you have a large credit card bill weighing you down, on rare occasions, it can be beneficial to take advantage of low or no-APR balance transfer offers which should buy you some time to pay down the debt or free up cash for investing in a money market or CD.

But you should be careful–credit transfers are a tricky business. Many times the low transfer rate is a temporary affair; transfer fees can eat into any gain in savings by transferring funds over; and, if you are late on payments, your APR will jump. Pentagon Federal’s deal is a lot better than that (again, lifetime APR, low fee and a 60-day grace period for payments), but there are many other lousy deals lurking in your mailbox.

Considering the caveats, the PenFed offer is a deal worth looking into – quickly though: the offer expires June 15.

– Tom Powell

For more great deals and offers, read FiDeals.