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Balance Transfer credit cards
Balance transfer is a very simple concept wherein you apply for a new credit card with a lower interest rate and then move your balance to it from the old card. What you are basically doing is using one card to pay off the other, but you will be getting a lower interest rate in the process.
Things that you need to know about credit card balance transfer
Balance transfer is a very simple concept wherein you apply for a new credit card with a lower interest rate and then move your balance to it from the old card. What you are basically doing is using one card to pay off the other, but you will be getting a lower interest rate in the process. Before you go for a balance transfer, you really need to do your homework, as many credit cards will accept balance transfers but moving your balance from your old card to the new one only makes sense if you save money in the process. You will need to take into account various things before you settle on doing a balance transfer from a credit card. The first thing you will need to look into is the balance transfer fee. You will usually need to pay a balance transfer fee of about 3% to 5% with most credit cards, but some cards also come with no balance transfer fees. Credit cards that are designed exclusively for balance transfer come with a lower introductory rate for transfers. The length of the promotional offer is also important, as you need to have some breathing room to repay your debt. You will hence need to shop around for a credit card that offers a long 0% intro period. You need to be aware of the fact that at the end of the intro period, the interest rate goes up. Hence, you need to plan on paying off your debt before the end of the introductory period where you will be paying 0% interest. Also, make sure that a credit card with no annual fee is the best for balance transfers.
Transferring your balance isn’t the same as repaying your debt. All you are doing is paying off your old credit card with a new one. You will be ideally saving all the money that you shell out on interest. The only solid benefit that you will gain from a balance transfer from a credit card is that you will be able to save money in the long haul provided you pay back the previous amount that you owed and you pay it at a lower interest rate. Another important reason to do a balance transfer to a single low-interest credit card is to simplify your financial life. If you are one of those people who have maxed out several credit cards, can’t keep payment dates and often accrue late fees, then putting all your credit card debt into one single low-interest credit card may actually be a good move on your part. This way you will have only one card to keep track of and only one payment to make each month.
Another thing that most people are unaware of is the fact that it is not just balanced from other credit cards that can be transferred but you can also transfer loans for cars, appliances, furniture and any other monthly instalment payments that you might have to a no interest balance transfer credit card using checks from the bank that issues the card. You will also need to be prepared for the balance transfer fee that you will be always charged, which is usually determined as a percentage of the total amount you will be transferring. There is no cap on the balance transfer cards, so the more you transfer, the bigger the balance transfer fee you will be paying. The usual balance transfer fee on most credit cards is 3%. You need to use the utmost precaution while ringing up new big-ticket purchases on your low-interest balance transfer card, as not all credit cards offer 0% interest on new purchases that you make on the card. Some balance transfer credit cards offer low- interest rates on transferred balances, while new purchases collect interest at the regular, high APR. Yet some cards do apply the low interest rates to new purchases as well, but only for the first six months. Most banks have started providing their customers with 0% interest balance transfer credit cards. Yet you need to have good or excellent credit scores in order to be able to qualify for one of these cards. Hence, low-interest balance transfer credit cards are not easily accessible for all people.
Paying off your debt should be the main focus of doing a balance transfer. You can, in fact, apply the money that you save in interest on your balance and get out of debt faster. Be careful that you don’t just move your debt from one card to another and then run up your balance again. It will be pretty hard to get out of debt if you continue doing that. Make sure you get out of debt fast with these methods of repayment.