If you’ve had your credit card for a while now, you must have heard about balance transfers. You might have gotten calls and messages about this offer, but you aren’t exactly sure about what to do about them. No worries, however, as this post will give you a quick overview of the things you have to know about credit card balance transfers.
What is balance transfer in credit card?
A balance transfer works this way whereas you will be able to pay your existing credit card balance by transferring the dues through payment from another credit card company or financial institution. This would result in paying off your existing balance in your old account while you will pay for the same dues in the new bank, albeit with different rates and terms.
There are different types of balance transfer offers that vary per credit card company. There are offers that allow the account holder to transfer only part of the balance, while others opt to transfer the entire account to the new credit card company. More often than not, people avail these offers when they wish to pay a lower monthly fee with an even lower APR or Annual Percentage Rate, and of course, to maintain a good credit score with their current account.
Initially, it’s your credit score performance that gets you the offer for a credit card balance transfer. Generally, if your APR is above 15%, you’re more than ready to make the transfer to lighten your burdens.
What makes a great offer?
If you find yourself overwhelmed with the offers coming in at you from left and right, it’s normal to get confused as to which one specifically is the best for you. If such is the case, below are a few questions that you have to ask before picking the right bank for your transfer:
1) How much will be the new credit card’s credit limit? This will determine how much exactly you can transfer from one account to the next. For example, if you only have a $10000 limit, and your total balance is $25000, that means you will have a remaining $15000 left to pay in your old account.
2) Is there a balance transfer fee? This usually costs 3-5% of the total amount of what you have to transfer, but there are companies which don’t have transfer fees depending on their promo.
3) Do they offer a low or at least a reasonable APR? This is what you’re after. If there is a significant comparison to the current APR you are paying with your old account, then you must opt to transfer your balance as soon as possible! Also, a low APR can give you the sufficient time to work on your debt.
4) How long will the rates last? It’s a fact that those intriguing 0% rates do exist, but most of the time, this is most likely to be just part of a temporary introductory rate. It’s important to know until when the offer stands, so you can be prepared when the rates drop back to normal. It’s also a must to take note that even if a lengthy 0% term is appealing, this means that it will also take you longer to complete your term to pay off what you owe the financial institution.
5) Consider the annual fees. Remember, each credit card company comes with their own annual fees. Compare all the current fees you’re paying to find out which is the best option for you.
Now that you are close to considering a balance transfer for your account, what are the things that you should not do? Here are a few things to remember now that your old balance is paid and you have a new one with your new credit card:
- Don’t be quick to close your old account with the paid balance. Remember, you would want to keep this account to maintain a good credit score. If you do choose to close it, you would have to contact the credit card company yourself.
- Avoid overusing your old credit card. Actually, as much as possible, avoid using it altogether. You don’t have to close it, just for as long as you don’t max it out. Should you need to use it, be sure that you will be able to repay your due in full within the next three months. Remember, you are still paying for your dues albeit in a new account, so don’t waste the balance transfer by accumulating a new debt with your old credit card.
- Don’t miss a payment. Remember, it’s important to keep a good credit score for ALL your accounts. Missing a payment might render your introductory rate null and void before you can make the most out of the offer. Also, you wouldn’t be able to get more offers with low rates if the credit card companies trace that you’re a delinquent payer.
- Don’t get addicted to balance transfers. Just because you get an offer does not mean you automatically have to avail it. Remember, this will reflect on your credit score, and your reputation only builds if you make your accounts last with no bad record. Hence, you can decline the offer if you think that the transfer will not be beneficial to your financial responsibilities.
As a final reminder before you take the opportunity, it’s a must to read the fine print before signing any contract. Ask all the questions you have in mind and be sure that you understand all the answers you get. It’s also important to note that balance transfers are not allowed between certain banks.
However, a credit card balance transfer may not always be the solution to your problems—especially where a credit card debt is concerned. It is advisable to seek other methods, for instance, you can try a reputable relief company like Financial Rescue LLC to alleviate your financial burdens. Call 1-877-97-DEBTS now or visit the website at financialrescuellc.com for more info.