If you’re thinking about transferring your credit card balance, transferring your balance can help. A balance transfer is a money management strategy that can help you save money. “What is a balance transfer? “Keep reading to answer questions like “How to effectively transfer your credit card balance” and learn more helpful tips on how to effectively transfer your credit card balance.
What are balance transfers?
Balance transfers allow credit card holders to transfer debt from their existing credit card account to another credit card account, usually to save interest.
Balance transfer credit cards offer a low introductory rate (usually 0% APR) on balances transferred for a limited period of time. You can then use the introductory period to keep up with your payments without worrying about high interest rates.
“The biggest advantage of using balance transfers is the 0% interest period,” says Leslie Tine, a debt lawyer who founded the Tine Law Group in New York. “That way you can pay off your debt faster. All the money goes right back to the principal.”
The balance that can be transferred to a balance transfer card is not just credit card debt. It is also possible to transfer other types of debt, including student loans and personal loans, to certain credit cards.
However, before you apply for a balance transfer for high-interest debt, it’s important to consider the risks and plan to repay the balance during the introductory period.
How does a balance transfer work?
A balance transfer is the transfer of money you owe from one credit card to another with less interest. When used wisely, balance transfers can help you control your debt. This is because these credit cards usually charge 0% interest for a limited period of time.
This way, you can save money and use it to pay off your debt faster. Keep in mind that these reduced rates are only valid for a limited period of time when regular rates apply. In many cases, you will also have to pay a fee to have the amount you transfer added to your balance.
What should I consider before transferring my balance?
There are many things to consider before applying for a balance transfer credit card. These include:
You decide how much to pay on your credit card. You can solve this problem by dividing the balance by the amount you can repay each month. For example, if you have £2,000 in debt and can pay off £100 each month, it would take 20 months to pay it off, assuming your card has provided 0% for more than 20 months.
Shop around for the best deals for you. Search and compare credit cards with MoneySuperMarket to help you find the best deal. Find a card with a 0% balance transfer period that allows you to pay off your existing card debt in full. You can check transfer fees and the ability to approve the card when you apply without affecting your credit rating.
Check balance transfer fees. Most balance transfer cards, especially those with the longest 0% interest period, typically charge a fee. This fee is usually charged as a percentage of the transfer amount, ranging from 1.5% to 3% of the card balance.
Do I have to transfer my balance?
If you can pay off your balance within three months or you don’t qualify for the favorable 0% APR offer, paying off your debt as soon as possible may be the best and most economical option. And if you want a higher limit and don’t mind paying interest, a personal loan can be a good help; you can pre-qualify to see how much you can borrow and what interest rate you can get before you accept the offer.
However, if it usually takes you months to pay off your high-interest debt and you have enough credit to qualify for a 0% APR card for balance transfers, balance transfers are the most valuable option. Such a card can save you a lot of interest and give you a head start on paying off the balance.
Will balance transfers affect your credit rating?
Balance transfers can affect both positive and negative aspects of your credit rating. Applying for a new credit card usually makes it more difficult to get a credit check, and it can lower your credit rating by several points. In addition, a new account will lower your overall average score, which is one factor that can affect your credit rating. In other words, increasing your available credit with a new card and adding another account to your credit profile may have a positive effect on your score, but you may see a bigger effect in the long run.
Balance transfer fees.
Balance transfer cards also charge a balance transfer fee. Transfer fees usually range from 2% to 5% of the amount transferred, depending on the card. These fees are added to the balance of the new balance transfer card.
For example, if you transfer $2,500 from your existing card to a balance transfer card with a 4% transfer fee, you would pay $100. The new balance is $2,600, which adds $2,500 to the original balance and $100 in fees. However, if you can pay off a significant portion of your existing credit card debt during the introductory period, you can save enough interest to cover the cost of the balance transfer fee.
Is the balance transfer card right for me?
If you’re not paying a lot of interest and you’re getting help paying off outstanding debt on another credit card, the balance transfer card may be right for you. The 0% promotion is best for customers who are disciplined enough to pay off their debts during the low-interest period and who won’t be tempted to use balance transfer cards for expenses.