Getting a balance transfer credit card could be a great move to pay off the balance of high-interest credit card debt. It can save you a lot of business or personal bucks by having all of your monthly payments go towards the principal amount instead of some being paid as interest. However, you should choose the right card for this purpose. Otherwise, transferring balances can build more debt if done using the wrong card. Some cards charge a balance transfer fee on each transaction, so you should consider this fee when calculating which card is right for your business.
What Is a Balance Transfer?
A balance transfer transaction allows you to move existing credit card debt to a new card that comes with 0% APR for a specific period of time. Such cards usually offer 12 to 18 months of 0% introductory APR so you can pay off debt without paying a single penny towards interest rate before the introductory period ends. Some balance transfer credit cards also come with perks such as cashback, free credit score monitoring, and extended warranties, etc. Hence, before you transfer an existing balance, make sure you have the right card to do so.
Tips for Choosing the Right Balance Transfer Credit Card
Transferring the balance of your existing credit card can help you save lots of bucks on interest during the debt busting process. But below are some tips on how to choose the right balance transfer credit card for your business to pay of debt without building more debt.
Introductory Balance Transfer Rate and Period
Balance transfer credit cards are introduced with a 0% introductory interest rate on balance transfer transactions. This means you will not be paying money towards the interest rate on the amount you have transferred to a new card for a given period of time. Not paying the interest amount enables you to pay off debt as faster as possible. So, make sure to check the introductory rate and period before you apply for a card. A card with a 0% introductory APR is great but a card with a lower interest rate like 2.9% is also good to apply.
Balance Transfer Fee
Credit card issuers usually charge 3%-5% as a balance transfer fee of the amount you have transferred to a new card. The larger the balance you transfer, the higher you will be charged for a transfer fee. If there is a card that doesn’t charge a fee on balance transfer, don’t be late to consider it. Otherwise, look for a credit card with a lower balance transfer fee for free balance transfer transactions.
Balance Transfer APR after the Introductory Period
Upon expiry of the introductory period, you will be paying interest on your balance according to the regular balance transfer rate. Sometimes it is the same as the purchase rate. And you don’t want to pay a higher interest rate than you pay on your old card. Read the fine print carefully to check the regular balance transfer APR before you apply for a new card. It is also a good idea to pay off your balance within the introductory APR to avoid interest.
Timing of the Transfer
Most credit cards offering balance transfer benefits require users to transfer balance within a given time period like 30 or 6 days of getting the card to apply for an introductory APR rate. If a card you are considering also comes with the same requirements and you are not ready to move your balance immediately, then wait to apply for the card so you will have enough time to do a transaction. Or opt for a balance transfer credit card that doesn’t require you to transfer the balance in a certain period of time.
The Credit Card Provider
A user cannot move the balance between two cards issued by the same bank or card issuer. If you are about to apply for a card and the same (old) card issuers is on your comparison list, skip that one and compare the rest of the options. Using credit card compare services is a great way to get a balance transfer credit card on better terms and conditions.
The Bottom Line
A credit card with balance transfer features can be a useful tool for consolidating and paying off credit card debt. You should choose the right card with favorable terms and conditions to get out of debt easily without building more debt.