Posted on: 15th Jan, 2010 02:37 am
A credit card balance transfer helps you in transferring the balance amount in one credit card account to another account held at a different credit card company. Here are few things that you should keep in mind while you transfer your balance from one credit card account to another:
Paying off old card with a new one - While you transfer balance from a credit card with high interest rate to the one with a low interest rate, you're actually paying off the old one with the new. Thus, the main benefit of credit card balance transfer is to save money in the long run if you pay off the earlier amount and that too at a lower interest rate.
Transfer any kind of debt - With the help of balance transfer, you'll be able to transfer your car, furniture as well as other installment payments to a credit card with no interest rate. This can be done with the help of checks from the bank who has issued your credit card.
Transfer rates - When you apply for a balance transfer card, you would get quite low APR – sometimes between 0% and 5%. However, after 6 - 9 months, the interest rates may rise. Also, keep in mind that within the 6 - 9 months time period, if you're late in paying your credit card dues or going over your credit limit, you'll lose the great rate even sooner.
Balance transfer fees - Most of us do not know but it's a fact that while transferring the balance, a balance transfer fee will be charged. This will depend upon the percentage of the total amount that you're transferring. Suppose, you are transferring $10,000 debt from one card to another, then you may have to pay $300 in fees.
Paying off old card with a new one - While you transfer balance from a credit card with high interest rate to the one with a low interest rate, you're actually paying off the old one with the new. Thus, the main benefit of credit card balance transfer is to save money in the long run if you pay off the earlier amount and that too at a lower interest rate.
Transfer any kind of debt - With the help of balance transfer, you'll be able to transfer your car, furniture as well as other installment payments to a credit card with no interest rate. This can be done with the help of checks from the bank who has issued your credit card.
Transfer rates - When you apply for a balance transfer card, you would get quite low APR – sometimes between 0% and 5%. However, after 6 - 9 months, the interest rates may rise. Also, keep in mind that within the 6 - 9 months time period, if you're late in paying your credit card dues or going over your credit limit, you'll lose the great rate even sooner.
Balance transfer fees - Most of us do not know but it's a fact that while transferring the balance, a balance transfer fee will be charged. This will depend upon the percentage of the total amount that you're transferring. Suppose, you are transferring $10,000 debt from one card to another, then you may have to pay $300 in fees.
Here are 3 things from my end which you should remember before you go for a balance transfer:
Simplify your payments – One of the major reasons to transfer your balance is to simplify your payments. Putting all your credit card debt on one card may be a good option if you've maxed out your multiple credit cards. It will be easier for you to keep track of your credit card payments if you've only one single account.
Good rates do not always apply for new purchases – You'll find that in most cases it is transferred balances which qualify for the lower rate. The new purchases that you make using this credit card will have an interest rate ranging from 8% - 28%. In some cases, you would get an introductory interest rate for new purchases but that would last for the first 6 months only.
You can't decide where your payments should go – If your card rules mention that some of your payments would go towards your low-interest balance first, then your card issuer will not allow you to make payments on your high interest purchases. Thus, you won't be able to pay off your high interest purchases unless you erase your low interest transferred balance. Thus, it's better not to use the balance transfer credit card for higher interest purchases. Rather, you can use another card for new purchases.
Simplify your payments – One of the major reasons to transfer your balance is to simplify your payments. Putting all your credit card debt on one card may be a good option if you've maxed out your multiple credit cards. It will be easier for you to keep track of your credit card payments if you've only one single account.
Good rates do not always apply for new purchases – You'll find that in most cases it is transferred balances which qualify for the lower rate. The new purchases that you make using this credit card will have an interest rate ranging from 8% - 28%. In some cases, you would get an introductory interest rate for new purchases but that would last for the first 6 months only.
You can't decide where your payments should go – If your card rules mention that some of your payments would go towards your low-interest balance first, then your card issuer will not allow you to make payments on your high interest purchases. Thus, you won't be able to pay off your high interest purchases unless you erase your low interest transferred balance. Thus, it's better not to use the balance transfer credit card for higher interest purchases. Rather, you can use another card for new purchases.
Hi Sara,
Balance transfer can help one pay off the debts at a low interest rate. But the danger is that people often get trapped into further debt with balance transfer credit cards. If they fail to pay off the repayments in full each month, they are charged higher rate of interest once the APR period is over. On top of that, if they continue spend on their credit cards, they end up being in larger amounts of debts.
Low-interest credit cards are available in the market to help people transfer higher-interest credit card balances. However, given the current economic situation, one needs to have good credit scores to qualify for one such low-interest card. If the credit scores are not good, one will not be able to take advantage of the low interest and reduce the burden of the mounting unsecured debts.
Balance transfer can help one pay off the debts at a low interest rate. But the danger is that people often get trapped into further debt with balance transfer credit cards. If they fail to pay off the repayments in full each month, they are charged higher rate of interest once the APR period is over. On top of that, if they continue spend on their credit cards, they end up being in larger amounts of debts.
Low-interest credit cards are available in the market to help people transfer higher-interest credit card balances. However, given the current economic situation, one needs to have good credit scores to qualify for one such low-interest card. If the credit scores are not good, one will not be able to take advantage of the low interest and reduce the burden of the mounting unsecured debts.