Dec 29, 2023 By Triston Martin
Saving money on interest payments is possible with the balance transfer credit card by moving a current credit card debt to another card with a 0% introductory APR promotion. Many credit cards offer introductory 0% interest on debt transfers for a year or more.
Balance transfers may be beneficial. But consider whether you can pay off the transferred debt before the introductory 0% APR term ends. If you want to discover the basics regarding credit card balance transfers, keep reading.
A balance transfer typically entails the following stages when dealing with major issuers; however, the specifics may vary.
Remember that you can't transfer across accounts with the same issuer in most cases. For instance, you can't move a balance from one Citi card to another.
Issuers may also allow you to begin a balance transfer by mailing you a cheque. But before you use one, you should check the fine print to see whether you may use it to transfer balances and at what interest rate.
You may see the previous sum in your new account and the balance transfer cost.
Think about the following factors while deciding whether or not to do a balance transfer:
Contrarily, shifting a balance might help you lower your credit usage rate, a major aspect of your score. If you transfer your balance from one credit card to another, you'll see an increase in both your available credit and your available balance on the transferred card.
You will save money if you can pay your transferred debt full before the promotional time expires. You can avoid paying any interest, which might save you significant money.
Until the balance transfer is paid in full, don't make any purchases or cash advances at the standard interest rate. If you have balances with varying interest rates, your monthly income will be distributed proportionally among them.
Your 0% balance transfer will only be paid the minimum amount required each month, and any additional amount you pay will be transferred to the account with a higher interest rate. When paying off a balance transfer, you may not realize that you are paying another amount.
Credit cards featuring a debt transfer feature often charge a fee for making a balance transfer. Depending on the kind of card used, the transfer charge might be anywhere from 2% to 5% of the total transferred amount. These charges will be made to your new balance transfer credit card.
If you have an existing credit card amount of $2,500 and want to transfer this to a balance transfer card costing 4%, you will be charged $100. With the initial amount of $2,500 and the added $100 in fees, your new balance is $2,600.
However, suppose you can pay off a significant portion of your old credit card debt during the introductory period. In that case, you will probably save enough on interest to offset the balance transfer charge expense.
Consumers with high-interest rate debt may benefit greatly from balance transfer credit cards. However, it would help if you had the self-control to avoid incurring any new debt on your previous cards and the determination to pay off your transferred balance before the conclusion of the introductory period.
You should evaluate your current financial situation before applying for a credit card with a balance transfer option. With good credit and the ability to manage your finances responsibly, a balance transfer credit card could be the solution you've been looking for to get out from under your debt finally.