These days, when people get a low-rate of balance transfer proposal from a credit card firm, they may be wondering for the benefits of the balance transfer. A credit card balance transfer can be an excellent way to save the amount on costlier interest debt rate. There are also other pros and cons that can come with merging the debts into just a single payment.
As the term indicates, transferring the amount which is overdue from one card to the other because of high-interest rate. The aim is to ultimately pay off the credit card debt during that low-interest rate period.
Users of credit balance transfer can only transfer the money based on the credit limit which is there on the new card. For instance, if the credit limit in the bank is $5,000 on the new card and there is a need to transfer a balance of $6000, then there is a possibility of transferring only up till $5000 including all the balance transfer fees.
But before applying for a balance transfer ask below questions
- Is there a balance on the credit cards?
- Is the payment for interest rates on that balance is higher?
If the answer for both the questions is “yes”, then the balance transfer is suitable. There is need not to worry about the savings which go in the clearing of the debts.
But remember, A balance transfer can’t work magically, users need to work on it and have a strategic plan and make a serious progress.
As Travis T. Sickle, CFP at Sickle Hunter Financial Advisors, suggested people understand why they incurred such massive debts in the first place and investigate those issues before applying. Before getting into a balance transfer, users also need to see the pros and cons of balance transfer and then take a firm step.
Pros of a Balance Transfer:
- Lower interest rate and have the option of clearing all the dues by the period ends.
- Customers may even get reward points on the new purchases.
- Shifting multiple credit card balances to single reduces the payment to several companies. It’s easier to pay for one company than for multiple companies.
- Moving the balance to a credit card with better terms.
Cons of a Balance Transfer:
- Try to clear off the dues during promotional offers otherwise, there may be a chance of ending up with higher interest rates than before. Remember credit card companies are counting on their customers, not on the balances they make. So, make sure not to miss the deadline. When transferring the credit card balance, it is important to remember that this intro rate is temporary. The duration generally differs from 6 to 18 months and will be stipulated in the offer.
- To avail a great promotional interest rate, users need to maintain an excellent credit score. If the customers don’t maintain high credit score they probably end up in paying regular interest rates on balance transfer.
- There is always a balance transfer fee which is around 1% to 3% and which can be expensive.
How a balance transfer works
- Customers can opt for balance transfer by signing into the account
- Call a customer representative which is on the back of the card and place an order for balance transfer.
- Login to the credit card Mobile App and place a request.
For all the three, users need to provide the account number for which they want a transfer and specify the amount they wish to transfer. New card firm may grant for the full amount or only a part of the request which depends on the credit card limit. Customers can shift any other type of cards where there is a balance but not to the same issuer. For instance, users can’t move the balance from Bank A to another or Bank B to another.
How much time does it require?
After placing the request it takes at least 3-5 working days for the amount to get transferred if it is a Visa Credit card. However, if the other bank card is not a visa card it takes 5 working days to get transferred.
A balance transfer can be an excellent way to help users stay on top of their repayments. But be careful before applying about the paybacks. To manage the debt, balance transfer card is handy and allows to pay the debt faster by shifting an existing balance to a new card with lower interest.