Seeing the current financial circumstances, you must have searched for the ways in which you can reduce your debts and save money. If you really want to make the ends meet and looking for a way in which you can do it then credit card balance transfer is the right choice for you. You choose to swap your credit card balances at all those places where the goods are bought and sold, not knowing you are accumulating debt. So, let us get to know more about the option of balance transfer in detail.
What is a Balance Transfer
When you choose a credit card balance transfer, you are actually transferring your debts with other cards. A balance transfer can really come handy in saving money on your existing credit card debt. One of the best things about credit card balance transfer is that you get to pay off your debt much faster. Make sure you have paid attention to the terms and fees before you actually apply for it. It is also important you have a good credit rating in order to have the approval.
Is there a fee for balance transfer
Yes, you have to pay a fee if you are opting for credit card balance transfer. There are people who feel reluctant to transfer their balances just because there is a fee. However, entirely depending on your debt, the fee will be much lower than the amount of interest you have to pay if the debt stays with the original lender.
How do balance transfer work
- When you have the green signal for transferring your balance, your credit company will get in touch with your creditors. This is when they will go ahead and pay the amount you have sanctioned. Two weeks is the maximum time it will take, otherwise it can also be done in a week time.
- When you are choosing to transfer your balance, you will indicate who you will be making the payment to, what is the amount you will be paying, and your account numbers, etc.
- If you have other payments to make before that time, make sure you have made those payments or else you will have to pay the late fees.
What are the different types of balance transfer rates
If you are new card member, you can expect the best transfer rates and usually, it is 0% or low. Credit companies really treat you well and one of the ways of treating you well is by offering incentives such low-interest rates. The main reason behind offering such incentives by these companies is to get your business to them and above all building a long-term relationship with you.
So, while you are transferring your credit card balance, make sure you are aware of the fact that the intro rate is not permanent. The time period will also vary and it will be mentioned in the offer as well. At times, these transfer offers are available on the existing card accounts as well along with promotional APRs which also have a set time period.
What are things to consider for credit card balance transfer
If you are really looking to save a significant amount of money in interest, then you should go for credit card balance transfer. But, having said that you have to be cautious or else it may prove costly for you as well. If you are still unsure whether you should go ahead with transferring your balance, make sure you have considered the below-discussed points –
Paying down the balance
If you are transferring the balance, it is imperative you have the plan as for how you will be paying it down. If you are making the most of some promotion, make sure you know as for how you are going to pay the balance before the due date of the promotional period. For instance – most of the credit cards offer 0% periods for a maximum of 15 months. But, if you don’t have a positive feel about it, then you can also pay down the balance with that time period. You are also being offered exclusive financing offers where you don’t have to pay the interest, but you need to make full payment for them prior to the end of the promotion. In the situation where you fail to make the payment in full, you have to pay the interest that would have accumulated during the promotional period.
The decision for transferring your balance should be taken during the promotional period for 0% introductory APRs. In addition teaser rates are also offered if you are a new card holder. As per these offers, you can easily transfer a balance at 0% and the time period also ranges from 9-15 months.
While transferring a balance, one of the key elements you need to consider is the APR on the loan you are transferring from. In addition, you should also consider the APR on the card on which the transfer is being done. The main reason behind transferring a balance is to save money on interest payments. Make sure you have transferred to a credit card with a low APR so that you get to save money. If you have any doubt regarding the APR, you can have a word with the both card companies before you actually transfer.
Card use post-transfer
When you are transferring balances, you should also be concerned about how you are going to use the cards once the transfer is done. Do you have plans to use the credit card from which you have made the transfer or you will close the account?
Before you jump to any conclusions, make sure you have considered as for how long you are having the account prior to the transfer and whether closing it will have a negative effect on your credit rating.The average age of your account is a key component in your credit score.
Therefore, is you have an old account, it will prove beneficial for your credit history. On the other hand, if you keep the account open and keep using it, you may not be able to transfer the balance from that particular account in the future.
Credit Score Effects
It is important you have considered your credit score before you transfer a balance. If you have faced some issues with your credit in the past, then the odds are high you may not get qualified for the credit card with a decent balance transfer APR. If you have changed the same balance from card to card then also it can have a negative effect on your credit score.
What are the pros and cons of credit card balance transfer
Having a look at the advantages and the disadvantages will give you a better idea of the balance transfer –
Also Read: Top 5 Credit Card Scams In 2016
Advantages of balance transfer
- You can make the most of a credit card with low-interest rate, especially when you have high-interest rate on your existing credit card. If you transfer a balance to a credit card having a low-interest rate, it can make a dent on your credit card debt.
- You can also opt for consolidating your credit card debt; this will leave you with fewer credit card bills to pay. When you have plans to move multiple credit cards balances to one single card, you will get deliverance from making payments for the multiple credit cards.
- You can also shift your balance to a credit card having better terms. If your existing credit card is having bad terms such as short grace period or high fees then it is advisable yocu should move to a credit card having better credit and you should close your old card account.
Disadvantages of balance transfer
- Taking into consideration the balance transfer fee, going ahead with balance transfer can prove costly. Before you go ahead with the balance transfer, it is imperative you have taken into consideration the cost of moving the balance.
- You always have a risk of having more debt. When you have transferred your balance to a new card, you will have more credit with you. Make sure you have limited yourself from spending on your old credit card; otherwise, you will only end up having more debt than what you have started with.
- Credit card balance transfer can even hurt your credit score. When you apply and open a new credit card account, it has a straight affect on your credit card. The credit score also gets a hit when you have a credit card balance of more than 30% of the credit limit. Let us assume that you are moving your card balance to a card that is not having enough credit, it can also drop your credit score.