Balance Transfer Credit Cards
Balance transfer credit cards are credit cards specifically made and used to pay off other credit cards (balance transfers). Below is an exploration of how balance transfer credit cards work and how you can use them properly to save money.
Understanding Balance Transfer
A balance transfer is the use of one credit card to pay off another credit card. The balance is shifted between cards; the new card takes the balance of the old card and the old card remains valid but with a zero balance.
The Idea behind Balance Transfer Credit Card
To attract new business, credit card issuers have designed a solution for customers with credit card debts by linking them up with another lender to make them switch over and use their credit cards. The credit card issuers provide a credit card with a promotional balance offer, which is available for a limited span of time. This enables customers to shift the balance over with the hope that they will be subscribers even when the offer period has expired.
Mainly a person may consider a balance transfer if they have credit card debt on one card and there is a low-interest credit card rate (sometimes 0%) to transfer to another card. This low introductory interest rate is only valid for a short period (6 to 12 months). The idea is viable if you can pay down your debt within this short promotional period.
Factors to Consider Before Doing a Balance Transfer
Balance transfer should save you money but it may fail due to the following:
Balance Transfer Charges
The credit card issuer usually charges a balance transfer fee in the range of 1 to 5% of the amount your transfer offers. The switch could be worthless based on the interest rate offered on the new card.
Increased Interest after the Promotional Period Expiry
The low-interest rate is valid only for a short period of time after which you will be required to pay a higher interest rate (could rise up to 19.99%). This is also the case if you miss any payments.If you purchase anything with the balance transfer credit card before paying off the original amount, these purchases will also attract an interest.
If you purchase anything with the balance transfer credit card before paying off the original amount, these purchases will also attract an interest.
When and How You Can Use Balance Transfer Credit Card to Your Benefit?
When used in the right way, a balance transfer can be a perfect idea that can work for you. For instance, if you make a major purchase and need some time to pay off, a low introductory interest rate can be a solution for you.
However, the plan may not work to your benefit if you plan to keep the balance past the introductory period, or if you plan to make any purchases with the card. In such a case, you should stick to your old card or consider looking at low-interest credit cards.
Use Balance Transfer Credit Cards to Pay off Your Debts Faster
Balance transfer credit cards allow you to shift your existing credit card balance onto a new card with low or 0% rates that run for a fixed period of time (6 to 20 months), after which the interest rates returns to a higher percentage. In most cases, balance transfer to a new card attracts a one-off transfer fee and a no annual fee credit card. You can use this plan if you want to consolidate your debts and avoid a high-interest rate. Apart from the 0% interest rate, balance transfer credit cards can help you to save a lot of money when paying your debt.
You need to understand how balance transfer works to so as to lower your credit card interest payment. You also need to factor the various types of balance transfer card available in your market, the different balance transfer cards, and the mistakes to avoid when using balance transfer cards.
Two types of Balance Transfer Credit Cards for You
Balance Transfer Credit Cards with no Annual Fee
If you are struggling to pay high credit card fees and interests, you can lower your costs and reduce your repayment time and increase your saving with 0% balance transfer and $0 annual fee credit card. Our guide will help you compare options to take full control of your expenses.
Reward Programs Balance Transfer Credit Cards
You can take advantage of both the balance transfer and rewards card; a low or 0% interest rate to repay your debts. Once the debt is fully paid, you can start earning points on purchases made with your new card. You can use our guide to explore different options and factors before applying for your balance transfer credit card.
Applying For You Balance Transfer Credit Card
There are two ways through which you can apply for a new credit card;
- Online application.
- In-store application.
You will be required to fill in the details of your existing credit card debt and request the balance transfer to your new card. Your debt will automatically be shifted to the new card (a process that takes only a few days). For a successful application, you need to meet the eligibility requirements.
Balance Transfer Fee: - This refers to a one-off fee paid to your new credit card issuer. It is mostly between 1 and 5% of the debt transferred to your new card. The balance transfer fee is mostly charged for a balance transfer with a longer promotional period.
The Need To Contact Your Own Bank: - Once you have provided the details of your existing credit card during application, the new card issuer will handle the balance transfer without involving you directly. However, you may have to contact you old issuer if you wish to close the old card to avoid maintenance costs and annual fees where applicable.
How Does The New Card Issuer Gain?
You may wonder how your card issuer will gain when they charge 0% interest rate, but they stand to gain in the following two ways:
- Higher Interest Rate – If you fail to pay your full debt within the promotional period, you will revert to a higher interest rate.
- Gain New Clients – People are always unwilling to shift from one bank to the other and the cost of gaining new customers is always very high. Enticing people with discounted or 0% interest rate is a cost effective way of winning new customers. To them, balance transfer credit cards is a cheap marketing strategy.
Balance Transfer with the Same Bank
It is not possible to do a balance transfer within the same banking institution. It is also not allowed to do a balance transfer to banks within the same group. Our list of banks which have locked balance transfer between each other will come in handy.
Are There Tricks In A Balance Transfer?
The promotional interest rate is valid for a specific period of time during which you will not pay high-interest rates. All the same, you are required to make the minimum monthly payment, and if you stick to the minimum monthly payment only, you will not have cleared your debt at the end of the promotional period.
Any debts remaining after this period will collect high-interest rates and your balance will continue to grow. However, the balance transfer is a safe process. You can go through our informative guide on how to avoid common mistakes for a smooth and effective balance transfer.
Balance Transfer for Your Personal Loan or Store Card
Most balance transfer offers are for credit card debts, but there are a number of issuers who allow debt transfer from your personal loan or store card. See our comprehensive list of banks that allows balance transfers from a personal loan.
Balance Transfer Credit Card
Balance transfer credit cards are a great solution for people who want to consolidate their debt or pay off large credit card expenses without having to pay heavy interest and added charges for defaulting. These cards usually have extremely low-interest rates, which is convenient if you need to pay off a large amount.
Some credit card companies even offer balance transfer cards with 0% interest rates for new customers. The introductory low-interest offer is only available for a limited period of time, which can be from 180 days, 10 months, 1 year, etc.
You can pay back your debt in this period with low interest. After the introductory period is complete, your balance transfer credit card will revert to regular interest rates. Banks and lending institutions offer this program to bring in new customers and hope you will continue to use the card even after your debt or bills are paid off.
This card is easy to use. You just need to choose the right credit card for your requirements and submit the application. When your application is approved and you get the card, you can pay off your other cards and debts with your new balance transfer credit card.
The debt from your high-interest credit cards is cleared so you don’t have to pay more money to the credit card companies than you need to. Your monthly payments will go towards the principal debt amount rather than the accumulated interest.
Low Balance transfer credit cards
If you have used a credit card ever, you already know about the hassles they come up with when it's all about interest rates. The flexibility that credit cards provide is not only convenient for your business purposes and busy lifestyle but also costly. A bank account is almost a safe option because you don't have to worry about the next statement coming at your hand as there is no 'debt' associated with those accounts.
But again, what could be the situation when you are in an urgent need of money but there is no way to get it instantly without waiting for the next paycheck? What if it's a health emergency or a purchase that you can't avail once you get the money needed at a later time? For these reasons and many others, credit cards are so much available among people from different job sectors.
If you are really burdened with debt that has been put forward by the high-interest rates charged by your credit card provider, you might have already searched for an alternative from the same bank or from a different bank that will charge you less than the previous one.
You have to transfer your funds from the previous card to the new card with lower interest rates. Or you might want to transfer your funds to another person's account.
This happens so often that a very high rate of interest rate is applied to your fund transfers too. To help you out in these cases and to meet your needs, different financial organizations in Canada are offering a new type of credit card which is called Low Balance Transfer Credit Cards Canada. The main aim behind these cards is to lower the transfer fees so that you can make as many transfer efforts as you want with a view to simplifying your credit card usage.
The main aim behind these cards is to lower the transfer fees so that you can make as many transfer efforts as you want with a view to simplifying your credit card usage.
These special cards usually have a flat rate applied which is almost same for all kinds of purchases and transactions. On an average, you will have to pay 0.99% charges for cash advances and 11.99% for every purchase and balance transfers. The annual fee is shortened in these packages too to make sure that you save hundreds of dollars while transferring funds is the major action that you perform with your credit card.
The annual fee is shortened in these packages too to make sure that you save hundreds of dollars while transferring funds is the major action that you perform with your credit card.
Just be aware of utilizing your grace periods and your usage quota for a better outcome. No credit card will charge you greater if you choose the low balance transfer cards at the right time.