If you carry balances on a lot of different loans and credit cards, you may be able to use a balance transfer credit card to save a lot of money on all that debt in interest costs and other charges.
A balance transfer card is any credit card that offers an attractive interest rate for transferring balances from other lenders. Used correctly, a balance transfer credit card can put the power of debt consolidation to work for you by lowering your payments, simplifying repayment and reducing your costs over the life of the debt. They can minimize the length of time it takes to pay off your debt, too. In many instances the credit card interest rate is lower than the interest rate on the card you are transferring the balance from.
Remember that the balance transfer interest rate is only a temporary introductory offer in many cases, such as in the case of a zero percent balance transfer offer for new cardholders. You should always check whether the rate changes after the introductory period is over. The new interest rate could cancel out any savings you received during the promotional period. Your credit limit on a credit card applies to balance transfers in addition to new purchases. That means you can only ever transfer as much of a balance as you have available in your credit limit. Use the following information to determine which type of balance transfer card is best for you.
The concept behind balance transfer credits cards is debt consolidation. Consolidating your debt means that you take all the debt you owe on different credit cards and transfer it onto a since credit card. Debt consolidation can allow you to save money, but it mainly simplifies your repayment. Instead of having to worry about paying several credit card bills, you only need to concern yourself with one or two. Many times, the balance transfer card has a lower interest rate than the credit cards you are currently using. Additionally, many balance transfer credit cards will offer a low- or zero-interest introductory period. This is typically the main draw of balance transfer credit cards.
However, there are many other benefits, too. Some of the benefits include:
To transfer any loan or credit card balance to a new balance transfer credit card, you will need to supply the new card issuer with the names and account numbers of all the accounts with balances you wish to transfer and the amount from each of these accounts you wish to transfer. Once you notify the new card issuer of your request to transfer these balances, the card issuer will contact the various creditors to pay those balances on your behalf. You will then owe the new card issuer those amounts paid. A balance transfer can sometimes take up to a couple of weeks to complete. Therefore, if you have a payment due on a credit card or loan during that period, it is wise to make the payment anyway.
If the balance transfer has completed before your payment is processed, you will simply receive a refund from that creditor on that payment. This is a preferable scenario to being charged a late fee or getting a negative mark on your credit for missing a payment you were still responsible for after all. After you complete a balance transfer, the account from which you transferred the balance remains open and active as long as you keep it open. Even if you transfer the entire balance due from a credit account, that account does not automatically close and only will be closed if you contact the creditor to request it. Before you do so, however, consider the impact closing a credit account might have on your credit score and credit report.
Some credit cards charge fees for balance transfers, usually factored as a percentage of the amount transferred. For example, if a balance transfer fee is three percent and you transfer $800 in balances, you will pay $24 in fees to make the transfer. Balance transfer fees are typically between three and five percent. A balance transfer fee must be calculated against the cost savings in interest for transferring the balance to determine if the actual benefit is really worth paying the fee.
The following cards do not charge balance transfer fees:
Since any credit card can include an enticing balance transfer offer, either promotional or ongoing, any type of credit card can be a balance transfer card. It is therefore worth examining the balance transfer offers of other rewards cards to compare them against the balance transfer offers of cards that do not offer any other rewards. You can get a cash back credit card, for example, that also has low rates and no fees for balance transfers. On the other hand, if you get a balance transfer credit card that does not offer any other rewards, it had better be a fantastic balance transfer offer to compensate. The balance transfer limits should be high or nonexistent, and the interest rate should be as close to zero for as long as possible. Otherwise, there seems to be no reason to get a balance transfer credit card that does not also come with other special benefits or rewards.