Balance Transfer Credit Card
Credit Card Balance Transfer is the transfer of the total amount of money owed to one credit card issued by a certain bank to another credit card issued by another bank. To credit card users who have outstanding balance and currently having a hard time paying their debts off, this can be an interesting option to the credit cardholders because the new bank or credit card issuer usually offers incentives such as low interest or interest-free period, additional reward points, installment payments on the balance transferred or other incentives. The process is extremely fast and can be completed in a matter of hours, in most cases.
When a person opts for a balance transfer, he can enjoy the lower rates offered by transferring your balance. Some credit cardholders repeatedly make use of this process to save quite a lot of money over the years. The idea is to switch to a new credit card the moment the previous one‘s teaser rate has expired. To discourage this type of behavior there are usually stipulations in the credit card contract preventing the credit card holder from transferring the balance a second time within a certain period of time. There are cases where the issuer bank extends the teaser rate or prevent it from disappearing prematurely.
There are a few things that credit card holders should know about balance transfers:
- When you get a new card to pay off the old one, make sure you are aware of the interest being charged by the new one; the biggest benefit of a balance transfer is you can save money over the long haul if you pay back the previous amount you owed and you pay it at a lower interest including all your cost.
- It’s not just balances from other credit cards that can be transferred. You may also transfer your outstanding balance from personal loan to your credit card. You can even transfer your immediate family member’s credit card balance or salary loan to your credit card. You’ll have just one card to keep track of and one payment to make each month.
- It is not quite as simple as making a swap from a high interest rate to a low interest rate anymore; with balance transfer. Banks charge balance transfer fee from cardholders who avail of the said program. Gauge if it might or might not be worth it, depending on how much money you’ll save on interest over the life of your debt.
- When transfer rates or teaser rates expire. Balance transfer can be enticing to customers for its savings on interest. However, keep in mind that teaser rates do not last forever. After a certain period of time, the interest rate will increase. Never make a misstep such as making delayed payments and your low interest will disappear.
- Be careful with your new purchases. While some cards offer great balance transfer rate, it does not mean rates on new purchases will also be the same. Make sure that interest on your new purchases will not eat up your savings on your balance transfer or worse, pay more than the original interest you are supposed to pay before the balance transfer.
- You might think that applying for a new balance transfer when your teaser rate expires is the perfect solution to avoid ever paying interest on your credit card debt. While it can be a tempting thing to do, it may actually impair your overall credit score. When you continue to open new low-interest accounts but maintain high debt levels, creditors may see you as a risk, which will give you difficulties in borrowing money for higher loans like car loan or housing.
- Almost all credit card providers are offering Balance transfer. It is very common, but the best items are available only to those with good or excellent credit. Maintain good credit standing to qualify and it will save you significant cash or help you pay off your debt sooner.
In the end, offers like balance transfer exists to help credit cardholders achieve better financial freedom. While balance transfers are convenient solutions for some credit problems like higher interest rates, trying to game the system may even result to poor financial habits as well as bigger debts.
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