Though credit cards have become indispensable in our daily lives, not many people are aware of the fundamentals of Balance Transfer involved in credit cards and how do they function in reality. If you have an outstanding amount to pay on your credit card and if the interest rate is very high for that particular credit card, you can try applying for a new credit card with low interest rate and transfer the balance from the old to the new credit card. This is a ploy many people use to get out of a messy high interest rate credit card and the new credit cards are known as Balance Transfer Credit Cards in this regard.
Opting for Balance Transfer Credit Cards
When you apply for a new credit card, the credit companies will facilitate the transfer of the balance amount from the old credit to the new credit card account. But, you should know when to opt for a Balance Transfer Credit Card; will it really suit your credit situation or not. Some of the conditions in which you can opt for a Balance Transfer Credit Card are:
- If you happen to owe any money to the bank on your old credit card, that debt will also be transferred to the new credit card. You will be immensely benefited with these balance transfer credit cards because, due to low interest rate, the amount you have to pay to repay your debt gets reduced considerably and thus you can save some money in the process.
- Often, banks give special introductory offers along with bank balance transfer credit cards wherein you will be charged 0% interest for a stipulated period or will be bestowed low interest rate payments. Grab such opportunities to apply for a new credit card.
- When your current credit card company is failing to send the bill on time, miscalculating the amount to be paid, inadequate customer support and poor technical service.
- When there is an unexpected crisis and your finances have dwindled and you are unable to pay such huge installments every month to clear the credit card debt.
- When you know for sure that you cannot repay the credit card debt unless the interest rate comes down.
Whatever balance transfer credit you might opt for, the truth is that, it is a transitory arrangement to make the interest rate come down and take more time for paying off the debt. For, there is no way you can escape paying off the debt or the credit cards will help you in any way to make the debt disappear. Remember that, balance transfer is nothing but an old wine in a new bottle.
Balance Transfer Fees
To avail the introductory offers provided by your new credit card company, transfer the balance from the old account to the new one immediately. Most of the credit card companies will charge you a special fees viz. balance transfer fees for transferring the balance from previous account to the new account.
Often, a certain percentage (normally 3%- 5%) of the balance transferred is being charged as balance transfer fees. Sometimes this fee might be real high; if you are smart enough; you can talk your way down, negotiate and then get the credit card company to reduce this fee for you. In case, they are not ready to reduce the transfer fees you can at least get the fees capped for a certain limit like $75 to $90 to minimize the fees that you have to pay in the end. This measure will help you immensely when the amount you are transferring happens to be real huge. Not all banks charge a balance transfer fees; look for an issuer who does not charge this fees while looking for a new plastic card. We don’t know for sure whether you will succeed or not but it’s definitely worth trying.
Best Credit Card For Balance Transfer
Shifting to a low rate balance transfer credit card might sound a lucrative option to those who are seeking financial relief. But, choosing the right kind of credit card is very important in order to gain all the benefits that come with this change of credit card. Getting the right credit card for balance transfer is not as easy as it sounds. You need to consider various factors before deciding upon a credit card for your balance transfer. Some such factors are listed below:
- Fixed - Rate Interest: Though people find 0% interest credit cards highly fascinating it might not suit everybody’s financial situation; especially, for somebody with an outstanding amount of debt to pay off. The amount of debt you owe plays a major role in choosing the appropriate credit card for you. Estimate your financial situation first, as to what time it will take to pay off your debt etc. In case you have a huge debt to pay off, you better choose a card that offers fixed rate as it will take you good deal of time to repay your debt.
Most of the credit cards offer 0% interest in the first 6 or 12 months and once that period is over you will be required to pay huge interest like before. Your situation will be back to square one and you won’t gain much from the change of credit card. So, opting for a fixed rate credit card will offer a chance to make balanced payments till the end.
- No Balance Transaction - Fees: People are often made to pay huge amount by the way of balance transaction fees. This fee is relatively higher, when the amount transferred is real huge and you were asked to pay a certain percentage of it as the transaction fees. Don’t let this balance transaction fee scare you. Not all credit cards charge you for transferring the balance amount from your old account to the new one. Look for an issuer who do not levy a transaction fees; some credit cards offering low-APR rates also will not charge any transaction fees for shifting your balance amount. Do some homework in the fiscal market by calling up several credit card companies and find out the kinds of fee levied by them.
- 0% APR: As an introductory offer, several credit cards offer 0% interest rate for the first 6 months or 12 months period to the customers upon a balance transfer. This offer can provide some relief to you when you have a small debt to repay and you have a systematized way of making your payments. All is not well with this offer, there’s a hidden catch which several customers fail to recognize in the beginning.
If the customer fails to make even a single payment on time, he/she will loose the privilege of 0% interest and will be forced to pay the high interest rate that is prevalent in the market. Besides, unless you have a reasonably good credit history you might not qualify for this offer. And also, make sure that the 0% APR applies to both balance and purchases as well. So, don’t be tempted by the 0% interest rates unless you are quite sure of your punctuality in making payments and you have a relatively small amount to repay.
- Ground Work: Do some ground work before choosing a new credit card. Several credit card companies display the special features and offer the customers who can obtain from applying for their credit card. Go through these offers and choose the one that suits your situation. Do not simply read the website and apply for the card online. Try to call the customer support of that particular credit card company and ask them about the advertised offers and get all your doubts clarified.
Repeat the same with one or two other credit companies and take your time to compare the benefits and pitfalls of those credit cards. Look for a credit card that carries special features like rewards programs, miles and bonus points. Now, apply for the credit card of your choice and wait for them to approve your application. Obtaining the best credit card for balance transfer alone is not going to work miracles for you. You should see to it that there is no new balance and do not forget to close the credit line on your old credit card. Take hold of your finances, before your expenses run amok with your new credit card.
Transfer To A Better Credit Card
On rare occasions, all the worst things in life will descend upon us like oodles of debt, atrociously high interest rates and the unimaginably worst credit history! Sounds like a perfect cocktail for fiscal hara-kiri right!! Don’t let these odds intimidate you! There will always be a light at the end of the tunnel, just grope around till you reach that place. Few guidelines that will help you in making a successful transfer of credit balance to a better credit card are as follows:
- Be Flexible: When you are basking in the halo of bad credit, there is all possibility that your eyes are flooded with wild fears and false hopes and you might even bid adieu to your discretion. When you have nothing to fall back upon, the clever thing to do would be to cling to anything and everything you can.
Your bad credit might stand in between you and your 0% interest rates but, it will not stop you definitely when you want to transfer your balance for a nominal fee. Don’t be adamant that you will transfer your balance only when they don’t charge you any transaction fees even when their interest rates are relatively lower than the ones you are paying every month at present. Use your head and opt for a low-APR loan instead of saving bucks on one-time transaction fees.
- Be Discreet: When you are steeped in a credit card debt, it is natural that you look for a way out. Often, balance transfer is the option used for bailing out the credit card sinking with debt. There are people who do this often and are always on the look out for a new credit card. Remember that each and every credit card will leave its impact on your credit history as there will be a new credit enquiry about your fiscal status. Too many credit enquiries are sure to botch-up your credit report. So, use this opportunity judiciously and do not go changing your credit cards just because you are in debts. Create a systematic plan to manage your finances and avoid getting into the debt once again.
- Act Fast: A credit card balance transfer will help you save your money and will also help you enjoy various privileges like rewards programs, bonus points, 0% interest rates etc. Do not wait for too long to transfer the balance amount to your new account. Transferring your balance amount within the stipulated time will make you eligible for receiving the introductory offers provided the credit card companies like 0% interest rates, bonus points etc. Once you receive your new credit card, you can either write to the new issuer to get the amount transferred from the old account or you can do it on your own through e-banking.
- Pay Promptly: The process of Balance transfer is no one-hour miracle, so don’t delay your payments and wait for the amount to be transferred. Continue making your payments till the end or else you will be forced to pay penalty.
- Be Cautious: Do not use your balance transfer credit card for making purchases. Many companies will charge you heftily on such purchases. Don’t run into debt again with your new credit card as well. Although, a new credit card provider might be ready to issue a new credit card for you, creditors might not take your credit card hopping in a positive manner. Lenders, whose business feeds on the interest people pay, might not approve of a person who evades paying interest continuously. Hope you have a safe balance transfer to your new credit card!
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