Do you have credit card debt? Is your credit card charging a high interest rate on that debt? Then you should strongly consider a Balance Transfer credit card. If you’re unable to pay off your debt immediately, the next best option is to limit the amount you’re paying in interest. There are quite a few credit cards on the market which allow you to transfer your credit card debt to a new card with a much lower interest rate. Related: The fastest way to pay off credit card debt
How does a balance transfer card work?
A balance transfer credit card is just like any other credit card. The truth is, that most credit cards offer a balance transfer option, but only a select few provide low interest rates and fees. The process is relatively simple, sign up for the credit card of your choosing, and then call the old credit card issuer and tell them you’d like to pay off your balance using your new card. The only downfall to conducting a balance transfer is that most of the card issuers charge you a fee of 3-5% of the amount you transferred. This fee is often off set by the benefits gained from paying a lower interest rate.
What are the benefits of transferring your balance?
For starters, the whole point of transferring your balance is to avoid paying interest on your debt. That means you can transfer a high APR department store card to a new credit card with a 0% introductory interest rate. Most cards that offer balance transfers have an introductory period where they won’t charge you interest for up to a year (some even 18 months). That gives you more time to pay off your debt without adding to it with high interest rates.
Another scenario for using a balance transfer card is to consolidate debt from multiple cards. Perhaps you have spread yourself too thin and said “yes” to all of those department store cards and the three cards your bank offered you. I’m sure you had the best of intentions, but now you have a few hundred dollars on each card, and they all have varying fees, and you are just having a hard time keeping track. Sound familiar? You should consider transferring your debt to a single credit card. That way you can eliminate unnecessary fees and your payments will all be due at the same time every month, avoiding late fees on that card you forgot you had! Keep Reading: 5 tips to get out of credit card debt quickly
Is the Balance Transfer Fee worth it?
As we stated earlier, most balance transfer cards will charge you a transfer fee of 3% to 5% of the amount they are accepting. Very few cards have a zero transfer fee and a low APR (keep reading we have the best cards below).
Let’s say you’re transferring $6,000 to a card with a 3% fee, but it has a 0% APR for twelve months. You are beginning the relationship with $180 in fees on top of the $6,000 you just transferred. You need to figure out how much you will save from the reduced interest rate. Is what you’ll save worth the cost to transfer the balance?
What are the best Balance Transfer Credit Cards?
There is no "one size fits all model" with credit cards, it all heavily depends on your individual needs. Card issuers offer various features ranging from basic balance transfers to perks like cash back, air miles, 0% APR on purchases and no annual fees.
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Pros and Cons of Balance Transfer Credit Cards
TAGS: debt advice
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