Balance transfer credit cards could be right for you if you’re having trouble paying off a high interest rate card or if you want to pay your debt off faster! Before selecting your balance transfer credit cards that fits your current economical situation, you should take a few factors into consideration.
Educate yourself on the transfer process and you’ll get the most out of your credit card experience. These types of credit cards have a certain appeal that separates them from other forms of plastic.
They offer applicants the chance to shift a balance from a high-interest card to a low-interest one. In fact, most transfer cards come with an initial 0% interest period. This means you can make payments that are directly applied to reducing the balance.
As you pay down the debt, you can save hundreds of dollars on interest expenses. Many balance
transfer credit cards appear to be the same, but in reality they vary quite a bit.
It’s absolutely crucial to consider the introductory period. The initial period of zero interest may be as short as three months, or as long as fifteen months. If you aim for at least 12 months of 0% interest, you’ll have a good amount of time to pay off the balance.
Check The Terms and Fees
Some cards offer you 0% APR only on the balance. This means that you will be charged a higher interest rate when you make a purchase. Moreover, all the payments you send in will first be applied to the balance, and then to the purchases.
While you pay down the balance, the new purchases and their attached high interest rates will sit and accrue on your statements. Eventually, you could pay more in high interest than you planned on.
To avoid this, look for a card that offers 0% APR on both balances and purchases – OR avoid putting additional purchases on your balance transfer credit card.
Most credit cards charge an initial fee for bringing over the new balance. This is sometimes a small percentage of the balance itself. Banks will often include a cap around $50-$75 on the balance transfer fee.
The savings you receive on interest will almost always outweigh this expense. After being approved for a card, you can also call the credit card company before transferring your balances to try and negotiate the fee.
Risks to Consider
Transferring balances only makes sense if you then apply funds each month to bring that balance down quickly. There is a risk to those who do not manage money well in transferring balances and then using those older credit accounts going forward.
Moving money around does not pay off debt. If transferring money to a new low interest or 0 interest rate credit account, put the old credit cards away.
You have consolidated your debt and the goal should be paying off that debt during the time period where you have a reduced interest or period of months that are interest free.
While some credit cards offer you a chance to pay off nagging debt, many come with other features as well. Some balance transfer credit cards include a rewards program. Others have a low interest rate that kicks in even after the introductory period. Think long term before you apply. Consider what benefits you’ll want after you are debt free.
A good balance transfer card can be a solid solution if it is used properly. After you have transferred the balance, think about creating a payment plan to get rid of the debt for good. Set aside money each month for card payments.
If at all possible, pay the card off before the introductory period runs out. As the balance dwindles, you’ll gain control of your finances. You’ll also begin to build a stronger credit history. When the debt is gone, you’ll be able to enjoy the card’s additional benefits.