What is a balance transfer?
Updated on April 19, 2018
What are the benefits of a balance transfer?- You can save money. Since your new credit card has a lower or 0% interest rate, you may save on interest while paying off your debt. - You can reduce or even pay off your debt. Moving an outstanding balance to a low interest rate credit card will help you pay off your debt faster as you will be paying off your principal balance rather than interest. - You can improve your credit. We all now that the less we owe, the better it will be for our credit. Therefore, lowering your overall debt can potentially boost your credit score.
Choosing the right balance transfer credit card- Interest on balance transfers. Look for credit cards with 0% intro APR on balance transfers. These cards are specifically designed for balance transfers and debt consolidation. - Balance transfer fee. Ideally, you would want to pay no balance transfer fee. But the cards that charge no balance transfer fee have almost become extinct. So, look for the offers that charge the lowest possible fee – 2%-3% of each balance transfer. - Introductory period. The longer the introductory period is, the more time you will have to pay off your debt. The average length of the 0% introductory period is one year, which is quite enough to pay off a considerable amount of debt. - Annual fee. While you may have no choice but pay the balance transfer fee, an annual fee can be avoided. Many balance transfer credit cards come without any annual fee, so shop around to find the best offer for you.
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