In financial circles, a balance transfer card is a type of credit card specially designed to help people make their outstanding credit card debts more manageable. The card often allows for a balance to be moved to it from a different credit card account, with the purpose of making the balance transfer card’s interest rate and payment terms more manageable. A balance transfer credit card is a great tool for someone who may be struggling to make ends meet, as it can provide significant savings, and make it easier for debtors to pay off their balances, faster.
Understanding Balance Transfer Credit Cards
A balance transfer credit card is a type of card that allows you to transfer the balance from another credit card, usually from a card that has a higher interest rate or different payment terms, onto the balance transfer card. Typically the idea is to move an existing credit card balance onto the balance transfer card in order to benefit from its lower interest rate or payment terms.
These credit cards are an especially wise choice for those struggling to keep up with credit card debt, or trying to pay down a large amount of debt. As the balance transfer card typically will have a lower interest rate and offer a promotional period with 0% interest, this can potentially save hundreds or even thousands of dollars.
Benefits of Balance Transfer Credit Cards
Balance transfer credit cards can be a great solution for people who find themselves in the uncomfortable situation of being overwhelmed by their credit card debt. Here are the top three benefits:
-
Lower Interest Rates: The biggest advantage of balance transfer cards is the interest rate. Many cards offer a promotional period of 0% interest, so instead of paying interest charges on the current credit card, the new card will only charge you the balance transfer fee plus the amount of the balance.
-
Time Savings: Balance transfer cards can help save you time. Instead of having to make multiple payments each month, you can make one payment towards the balance on your new balance transfer card.
-
Improved Cash Flow: Finally, balance transfer cards can help improve your cash flow. By transferring your current balance from a high interest rate card to a balance transfer card with a lower rate, you can save money and reduce the amount of your monthly payments.
How to Choose the Best Balance Transfer Credit Card
When choosing a balance transfer credit card, there are a few things you should consider. Here are the main points to consider when deciding on the best balances transfer credit card for you.
-
Look for Promotional Offers: Many balance transfer cards have promotional offers in the form of introductory periods that offer 0% interest. This can be an effective way to save money, as you may pay no interest on the balance transfer during this period. However, it’s important to read the fine print and understand any restrictions or limitations that may apply.
-
Consider Fees: Balance transfers usually come with fees. While some credit cards charge a flat fee, others charge a percentage of the balance being transferred. Make sure to understand the fee structure before applying for a card, so you can be sure to get the best deal available.
-
Assess Your Payments: It’s important to ensure that you will have the funds to pay off your balance during the promotional period. Most of these cards require that you make minimum payments, which can be a great way to stay on track with paying off the balance.
-
Consider Other Benefits: Many balance transfer credit cards offer bonuses, rewards, and additional benefits. Look for a card that will not only meet your balance transfer needs, but offer benefits that suit your lifestyle.
-
Take a Look at Your Credit Score: Before applying for a balance transfer card, it’s important to check your credit score. Many of these cards require a good credit score in order to get approved, so make sure you meet the minimum requirements before applying.
In times of financial difficulty, a balance transfer credit card can be a great solution. By transferring your existing balance to a balance transfer card with a lower interest rate or different payment terms, you can save money and make your monthly payments more manageable. It’s important to assess your financial situation and be sure to choose a card that meets your needs and offers the best benefits possible. When used responsibly, a balance transfer card can be a great way to save money, reduce your monthly payments, and help you get back on track with your finances.