Balance transfers can be an important tool in your fiscal arsenal. They allow you to temporarily move your debt to a non-interest bearing account. But there’s a catch; fees, fees and more fees. Here’s two ways to limit the fees, and take advantage of balance transfers.

1. Don’t list your transfers on the initial application: If you list $6,000 worth of transfers and you only receive $5,000 in credit from the credit card, they will transfer the $5,000, charge you a fee, and you still have $1,000 left over. It’s better to list nothing, or if you have to, list a very small amount like $100. Once you get the card, call the company and request a credit line increase if you don’t have enough to cover your transfer. Don’t be afraid to do this more than once. Then request balance transfer checks. They work like personal checks except the debt is placed on your new credit card instead of your checking account. They allow you to control what gets transfered and ultimately control the fees. Use them sparingly, as we mention below.

2. Limit the amount of transfers: For each transfer, you will be charged a fee. Nowadays, most banks have a 3% transfer fee, and cap it at around $75. If your card doesn’t have a cap, cancel it and get another one. Let’s say you want to transfer $6,000 to your new card, from two old cards with a balance of $3,000 each. Two transfers with the above mentioned fee’s will cost you $150 ($75 cap x 2). If you could combine this debt into one account and make only one transfer of $6,000, you would only pay $75. So, how do you combine all your debt into one account so you can limit the fees? It’s not easy, but here are some suggestions. Be careful. These ideas can cost you more in other fees if you’re not careful and quick, but here they are:

• Use Existing Cards: Sometimes credit card companies will do transfers for free, for existing customers. If one of your existing credit cards will do this for you, and you won’t exceed your credit limit, you may want to temporarily combine your debt to an exisiting card before moving it to a new one.
• Get a Personal Loan: Do you have a friend or relative that would loan you some money for a short period of time? You can pay off the existing credit cards, get a balance transfer check from your new card and write a one check to the lender.
• Get a Personal Loan from Strangers: Prosper.com is a marketplace for credit that enables people to lend money to other people in a safe, efficient manner. You create an account with Prosper, type in how much you want to borrow so temporarily payoff our old credit cards, and then have people bid on loaning you money. You can even invite your friends and family to bid on your loan. To make it easy to get started, we set up a Fiscal Sanity group on Prosper. Just click here to find out more!
• Home Equity Line of Credit: If you have a line of credit, use it to temporarily pay off your credit cards, and then pay it back by writing a check from your new balance transfer credit card.