- Why You Should Consider Balance Transfers
- How to Do a Balance Transfer
- What to Watch Out for With Balance Transfers
Most people carry some form of debt, whether it’s a mortgage, car loan, student loan, or credit card debt. If you have credit card debt, you’re not alone. In fact, according to NerdWallet’s 2018 American Household Credit Card Debt Study, the average U.S. household owes $9,333 in credit card debt.
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Why You Should Consider Balance Transfers
If you’re struggling to pay off your credit card debt, you may be considering a balance transfer. This is when you transfer your debt from one credit card to another. Balance transfers can be a great way to save money on interest, pay off your debt faster, and get your finances back on track.
Save money on interest
If you’re carrying a balance on your credit card, you’re probably paying a lot of interest. Balance transfer offers can help you save money on interest charges.
When you transfer your balance, you’re essentially taking out a new loan to pay off your existing debt. The new loan comes with a lower interest rate, which can save you money on interest charges.
Balance transfer offers typically have a promotional period, during which the interest rate is low or even 0%. After the promotional period ends, the interest rate will go up.
To avoid paying more interest, you’ll need to pay off your debt before the end of the promotional period. Otherwise, you could end up paying more in interest than you would have with your old card.
Get out of debt faster
If you’re struggling to pay down your credit card debt, you may be considering a balance transfer. This strategy can help you get out of debt faster and save money on interest payments. Here’s what you need to know about balance transfers and how to make them work for you.
What is a balance transfer?
A balance transfer is a way to move your high-interest credit card debt onto a new card with a lower interest rate. This can help you save money on your monthly payments and get out of debt faster.
How do balance transfers work?
When you open a new credit card, you’ll typically have the option to transfer your existing balances over to the new card. You’ll need to provide the account information for your current cards, and the issuer will then pay off those balances and close the accounts. Your balance will then appear on your new card.
Most cards will charge a fee for balance transfers, usually around 3-5% of the amount being transferred. For example, if you’re transferring $5,000 worth of debt, you may be charged a $150 fee. Make sure to factor this into your overall savings plan.
What are the benefits of a balance transfer?
There are several benefits of doing a balance transfer, including:
-Saving money on interest payments: If your new card has a lower interest rate than your current card, you’ll save money on interest every month. This can help you get out of debt faster. Depending on the size of your balance and the difference in interest rates, Balance Transfers could save you hundreds or even thousands of dollars in interest payments over time. Just make sure that you continue making at least the minimum payments on both cards until the balances are paid off in full.
– simplifying your finances: If you have multiple credit cards with different interest rates and due dates, it can be tough to keep track of everything. Balance transfers can help simplify things by consolidating all of your debt onto one card. This can make it easier to stay organized and make timely payments every month.
– freeing up cash flow: With lower monthly payments,you’ll have more money available each month to put towards other financial goals like saving for retirement or an emergency fund . Remember, it’s important to continue making at least minimum payments on any remaining debts so that you don’t end up further behind .
Improve your credit score
One of the most common questions people have about balance transfers is whether or not the process will help or hurt their credit score. The answer, like with most things related to credit, is that it depends. If you’re currently carrying a balance on your credit cards, then a balance transfer could help improve your credit utilization ratio, which is one factor that makes up your credit score.
Your credit utilization ratio is the amount of debt you’re carrying divided by the amount of available credit you have. So, if you have a total of $10,000 in available credit and you’re carrying a balance of $2,500, your credit utilization ratio would be 25%. Generally speaking, it’s best to keep your credit utilization ratio below 30%, so in this case, a balance transfer could help you get closer to that target.
Of course, there are other factors that make up your credit score besides your credit utilization ratio. Payment history and the length of your credit history are also important factors. So if you’re considering a balance transfer solely for the purpose of improving your credit score, it’s important to keep those other factors in mind as well.
How to Do a Balance Transfer
A balance transfer is when you move your credit card balance from one card to another. This can be a great way to save money on interest, pay off your debt faster, or consolidate your debt into one monthly payment. There are a few things you need to know before you do a balance transfer, though. In this section, we’ll cover everything you need to know about balance transfers so you can decide if it’s the right move for you.
Find the right card
There are a few things to consider when you’re looking for the right balance transfer credit card. Some cards have introductory periods with 0% APR, which can save you a lot of money on interest if you pay off your balance before the intro period ends. But be sure to read the fine print—many cards charge balance transfer fees, and some even charge interest on your transferred balance during the intro period if you don’t pay it off in full.
You’ll also want to consider the regular APR of the card. Once your intro period ends, any remaining balance will start accruing interest at the card’s standard rate. If you know you won’t be able to pay off your balance in full before then, look for a card with a lower APR so you can minimize your interest costs.
And finally, remember to factor in any annual fees when you’re comparing cards. Some balance transfer cards come with annual fees that can cancel out any interest savings you would have otherwise received.
Compare transfer offers
When you’re shopping for a balance transfer credit card, it’s important to compare offers to find the one that will save you the most money. Here are some things to look for:
-A low intro APR: This is the interest rate you’ll pay on your transferred balance for a promotional period, usually 12 to 18 months. The lower the better.
-A long intro period: A longer intro period gives you more time to pay off your transferred balance before the intro APR expires.
-No balance transfer fee: Some cards charge a fee, usually 3% to 5% of the amount you transfer. Look for a card that doesn’t charge this fee.
-Rewards: Some balance transfer credit cards also offer rewards, such as cash back or points, on your purchases. If you think you’ll carry a balance after the intro period ends, look for a card with a low ongoing APR as well.
Initiate the transfer
The first step is to find a new credit card that offers a 0% APR promotional balance transfer period. Once you’ve found the right card, you’ll need to request a balance transfer form from the new issuer and complete it. You will need to provide your account information for both your old credit card and your new credit card.
Once the balance transfer form is complete, you will need to submit it to your new credit card issuer. It can take up to two weeks for the balance transfer to be processed, so it’s important to continue making payments on your old credit card until you see that the balance has been transferred.
What to Watch Out for With Balance Transfers
Balance transfers can be a great way to save money on interest and pay down your debt faster. But before you sign up for a balance transfer, there are a few things you should know. In this article, we’ll talk about some of the fees and pitfalls you should watch out for with balance transfers.
Balance transfer fees
Most balance transfer cards come with a balance transfer fee, which is typically 3% of the amount you’re transferring. For example, if you’re transferring a $5,000 balance, you’ll have to pay a $150 fee.
Some cards charge a flat fee for balance transfers, regardless of the amount you’re transferring. For example, a card with a $5 flat fee would charge you $5 to transfer a $1,000 balance — the same fee as if you were transferring a $10,000 balance.
The good news is that some cards don’t charge any balance transfer fees at all. However, these cards usually come with other trade-offs — such as a higher APR or shorter 0% Intro APR period.
Most balance transfer cards offer an intro 0% APR period, which can save you a lot of money if you pay off your balance before the end of the intro period. But beware — many also come with a fee for transferring your balance, typically 3% to 5% of the amount transferred.
Most balance transfer credit cards come with an annual fee, which can range from $0 to upwards of $100. If you’re trying to pay off your balance quickly, you’ll want to make sure that the annual fee doesn’t eat into your savings too much.
Many balance transfer cards also offer introductory rates, which can be either 0% or a low APR. These rates usually last for six to 18 months, after which the APR will go up. If you think you’ll be able to pay off your balance before the intro period ends, a balance transfer card with an intro 0% APR could be a good option for you. Just make sure you understand how much the interest will be after the intro period ends.
Credit score requirements
Most balance transfer credit cards require good to excellent credit for approval. This means a FICO® Score☉ of 690 or higher. But beware: Even if you have good credit, you might not qualify for the 0% APR that these cards offer.
Some issuers use your income and debts to calculate your creditworthiness and set your APR. Others may just do a simple credit check. If you don’t meet the issuer’s requirements for a 0% APR, you could end up with a much higher rate — which negates the value of the balance transfer.