If you have a credit card balance that has been accrued for a long time, it can feel impossible to pay it off. The longer you delay paying it off, the more interest you accrue. This is the type of debt that can be very costly.
A credit card balance transfer is a great option. Online marketplaces allow you to compare lenders and view the offerings of each one. Choose the card that suits your needs.
Here are the basics of a balance transfer, how it works, and how it could potentially save you money on interest.
Balance transfers are when you transfer an existing balance from a creditcard with a high rate of interest to a new one, usually one with a lower APR. These intro APR deals are only available for six to 21 months. Your principal will be paid directly and interest will not accrue during that period.
The balance transfer fee is usually 3% to 5% of the balance. Cardholders must pay it. If you transfer $5,000, the fee can be $150 or $250.
You could save hundreds, if not thousands of dollars in interest if you are able to pay off the balance by the end of the 0 interest deal. You can save as much as $2,000 by checking out these offers.
Let’s suppose you owe $5,000 on your card with 15% APR. You are eligible for a card at 0% APR for 12 month and a 3% balance transfer fees. The balance can be paid off before the 0% intro rate period ends, which will save you $1,073.89 in interest. To see how much you can save, use a balance transfer calculator.
Even if the intro APR doesn’t expire, it is possible to save money by paying the majority of the balance off before the higher rate kicks into effect.
All balance transfer credit cards may not be created equal.
When choosing your card, there are many things to consider.
The longest intro APR period credit card. This will allow you to repay your balance more quickly. While many cards offer 0% APR for both balance transfers and purchases, the intro APR period for balance transfers may be shorter than for new purchases. You should understand the terms of balance transfers and whether interest charges apply to new purchases.
You will not have to pay an annual fee for the card and you will get other benefits. You should also look for cards with other benefits such as cash back rewards on certain purchases, or a sign up bonus when you spend a certain amount in 90 days. You should not have a balance you cannot afford to repay.
Card with a low balance transfer fees The minimum balance transfer fee is usually 3%. However, there are cards that do not charge any balance transfers fees. If you choose a card that has a longer intro APR, paying a higher balance fee might be worthwhile.
Please note that your current balance cannot be transferred to another card issuer. If you have a Wells Fargo credit balance, you can’t transfer it to another Wells Fargo card while still being eligible for the intro APR offer. You must choose a different credit card company.
Credit card companies won’t offer the intro APR if you don’t pay your bills on time. The company could cancel the offer if you make late payments.
You can avoid this by setting up automatic payments to your card. The payment will be processed a few days prior to the official due date. You can then create an autopay reminder on your phone and log in to double-check that it has been successful.
You will also need to transfer the balance by calling your credit card issuer, or logging on to your account online. This process must be initiated as soon as your new card is opened. The intro APR discount starts as soon as the account is opened. It does not start when the balance has been transferred. You may lose your interest-free discount if you wait too long.
Balance transfer offers are usually only available to consumers with credit scores between 700 and 750. However, some cards will accept those with scores between 650 and 700. You may have to wait until your credit score improves before you apply for a balance transfer.
A credit card balance is a sign of excessive spending. Start tracking and budgeting your expenses before you apply for a balance-transfer. Before you apply for a balance transfer, it is important to change the ways that led you to credit card debt. Otherwise, this will only be temporary.
