While carrying high interest debt, it is difficult to think about how another credit card will possibly aid your situation. But the right type of credit card such a balance transfer card will actually offer some relief. So consider the benefits of balance transfer properly.
Define Balance Transfer
Transferring the balance implies that you are moving all or at least a part of a debt from one of your credit card to another. People are seen to make use of balance transfer credit cards to get benefited by lower rate of interest. So switching your debt to a card that comes with lower rate of interest will allow you:
- to pay less rate of interest on the existing debt
- to organize all the finances by making several monthly payments consolidated into one
Ways To Save Money With Balance Transfer
Select Balance Transfer Carefully:
Get an idea of all the credit cards, balances, and rates of interest. Select one or more credit cards with high rates if interest whose balance you wish to transfer to save some money on interest. There is a need that the balance will be in your name to qualify for the transfer. So if your spouse is having a credit card balance with high interest and you have great credit, then you can use a 0% offer to aid him to pay off this old balance and then start together debt-free.
Evaluate The Fee For Balance Transfer:
If there is any balance transfer fee, note and calculate how much you need to pay on that amount you wish to transfer. It is usually 3%-5%. So you will have to pay $30-$$50 for every $$1000 that you will transfer. If in the fee the capital amount is included then you can transfer larger balances easily. So if the balance transfer fee is of 3%, till a maximum of $75. You can transfer a balance of $5000 but because of the capital you do not have to pay $150 but $75 which is an effective rate of interest of only 1.5%
Ensure How Much Transfer Is Required:
Check the limit on your new credit card. You can place a request for a balance transfer of more than the available line of credit. The balance transfer fees will count toward that limit. So if you have $10000 in your available credit, you would not be able to transfer a $10000 balance with a 3% fee for balance transfer. You will require $10300 in your available credit to complete this transaction. The maximum you can transfer is $9700 approximately.
Decide The Place For The Balance Transfer funds:
Decide whether you want it to directly go to another creditor to clear off the balance or you want the amount to be deposited in your bank accounts in order to pay off the other debts. Make sure that in the latter scenario, a deposit of funds in the bank account is not considered as a cash advance. If you take a cash advance accidentally then you will pay interest immediately on the transaction and at a high rate.
Examine The Time Limit for Completing The Transfer:
In case of a new credit card, you will have to get the balance transfer completed within a few days. It is usually 1-2 months in order to get any promotional rate. Become aware of it before getting a new credit card. If you complete the transfer after the window closes then you will have to pay the regular rates of interest.
Meet The Basic Needs:
If your new account is with the same credit card company whose balance you wish to pay off, you cannot perform a credit card balance transfer. A past due payment with the creditor to which you wish to transfer the balance or in case of filed bankruptcy, your balance transfer request will be declined.
If money can be saved at the time of the promotional period, despite any balance transfer fees, you will come out ahead of any debt easily. So instead of spending your savings, work it into your balance to get out of debt faster than it was possible.