Credit card balance transfer is a commonly used financial tactic to transfer the debt from one credit card (which has a high rate of interest) to another credit card (which has a relatively lower rate of interest).
It is important to have a clear idea of what is a balance transfer if you are aiming to get rid of your credit card debt faster.
With a balance transfer, you can apply a larger part of your payments to the principal every month instead of the interest charges.
However, before you choose balance transfer credit cards, take a look at the following key points:
How to Transfer Credit Card Balance
When you are assessing balance transfer credit cards suitable for your needs, you need to carefully go through the terms and conditions and make sure balance transfers are allowed.
If the terms list an APR and a balance transfer fee, then it is clear that you can use the card to transfer a balance.
But if these costs are missing from the listed terms and conditions, you should check with the credit card’s customer service to clarify whether balance transfers are allowed.
With a balance transfer credit card, two APRs need to be considered: the introductory or promotional rate and the regular interest rate that will become applicable once the promotional period ends.
You should compare the regular (post-promotional) rate of interest with the rate you already have on your existing credit card. Also, take into account the balance transfer fee, which will be automatically added when the balance is transferred.
Ensure the Balance Transfer is Completed Successfully
Credit card balance transfers are not as swift as making a credit card purchase. It may take a few days or even weeks for the balance transfer to be processed. You should continue to make your monthly payments due on your old credit cards until a zero balance shows up in your account statement.
People often make the mistake of ignoring billing statements as they assume that their balance would have been transferred.
If the balance transfer is yet to be completed or there is some error, you may end up missing a payment on your old credit card. This will result in a late fee as well as a late payment entry in your credit report.
Saving Money on Interest
If you pay the full balance while you are still in the promotional period, you will be able to save the maximum on interest charges.
You can simply divide the balance by the number of promotional months to determine the monthly payment you are required to make in order to pay off the balance and entirely avoid interest.
In case your credit has a different type of balance, such as a purchase balance, it may sometimes take a longer time to pay off a balance transfer.
Credit card issuers typically apply payments to the balance with the lowest rate of interest until the balance is completely repaid. You will pay interest only on the balance transfer until the lower interest rate balance has been completely paid off.
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