What Are the Benefits of Balance Transfers?
- Saving money. If you’re carrying balances on credit cards and paying interest every month, a balance transfer could save you a significant amount of money.
- More money for other expenses. First, you’ll be able to pay down your credit card debt more quickly because more of your payments will be put directly to the ...
- Consolidate your payments. ...
Full Answer
What are the pros and cons of balance transfer?
- You could end up with a higher interest rate after the promotion.
- You may not save money after the balance transfer fee is added.
- Your credit score could be impacted.
- You risk creating more debt.
What are the benefits of a balance transfer?
- You can take advantage of lower credit card interest rate.
- You can move your balance to a credit card with better terms.
- You can consolidate your credit card debt.
How do balance transfers affect my credit score?
- Payment history — This factor refers to a borrower making on-time payments to debts. ...
- Amount Owed — Credit usage is approximately 30 percent of a credit score. ...
- Length of Credit History — Your credit history typically accounts for 15 percent of a credit score. ...
- New Credit — New credit inquires generally make up 10 percent of a credit score. ...
Is a balance transfer good or bad?
In general, balance transfers are a good bet to improve your financial picture. Just be sure you consider the following factors first: Don’t be a serial account opener, bouncing your balances from card to card. Choose a good balance transfer offer, preferably one with a long introductory 0% APR period.
Is it beneficial to do a balance transfer credit cards?
But in general, a balance transfer is the most valuable choice if you need months to pay off high-interest debt and have good enough credit to qualify for a card with a 0% introductory APR on balance transfers. Such a card could save you plenty on interest, giving you an edge when paying off your balances.
Do balance transfers affect credit score?
A balance transfer can be a great tactic to manage debt, but it can affect your credit score when it changes your credit utilization rate, the average age of accounts or the number of inquiries on your credit report.
Is there a downside to balance transfers?
Cons of a Balance Transfer You could end up with a higher interest rate if you don't qualify for a promotional interest rate because your credit score, income, or existing debt. You typically must have an excellent credit score to get a low interest rate balance transfer offer.
What is the purpose of balance transfer credit cards?
The goal of a balance transfer is to save money on interest while you pay off credit card debt. You can move a credit card balance to a new card, but typically, you're not allowed to transfer a balance from one card to another that's issued by the same company or any of its affiliates.
Is it worth it to transfer a balance?
A balance transfer generally isn't worth the cost or hassle if you can pay off your balance in three months or less. That's because balance transfers typically take at least one billing cycle to go through, and most credit cards charge balance transfer fees of 3% to 5% for moving debt.
What credit score is excellent?
800 and upAlthough ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
What are the advantages and disadvantages of a balance transfer?
Balance transfer prosIt can consolidate your payments. ... You can save money on interest. ... Move your debt to a different credit card. ... You may have to pay a balance transfer fee. ... The low interest rate doesn't last forever. ... You could add to your debt. ... You may need healthy credit.
What happens if I do a balance transfer?
When you initiate a balance transfer to a new credit card account, you "move" your balance from one or more cards to the new card. The card issuer will either pay off your other balance directly or cut you a check so you can do so.
How many credit cards should you have?
Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time. Having very few accounts can make it hard for scoring models to render a score for you.
What is a balance transfer fee on a credit card?
A balance transfer fee is a charge imposed by a lender to transfer existing debt over from another institution. Balance transfers are commonly offered by credit card companies. Fees generally range between 2% and 3% of the amount transferred or a fixed dollar amount (as high as $10), whichever is greater.
Can you use a credit card to pay off another credit card?
Banks don't allow you to pay your credit card balance using another credit card. Typically payments via check, electronic bank transfer or money order are the only acceptable methods of payment.
What is the best credit card with no balance transfer fee?
Just like there’s no one “best” credit card for everyone, the right credit card with no balance transfer fee will be different for everyone. Before...
What is a good credit card utilization rate?
Sometimes called your debt-to-credit ratio, your credit card utilization is the ratio of your overall outstanding balance to your overall credit ca...
How long do credit inquiries stay on your credit report?
For most people, according to FICO, a new hard credit inquiry will stay on your credit report for two years but it only impacts your score for one...
How do you increase your credit limit?
If you think your odds of receiving a credit limit increase are high, this can easily be done through an online request by logging into your credit...
Does a balance transfer affect your rewards points?
A balance transfer should not affect any rewards balance you already have. But, you won’t score any rewards on a balance you’re transferring as rew...
What is the benefit of a balance transfer card?
A second benefit of a balance transfer card is consolidating your existing debt. If a consumer carries balances on several cards, merging the balances onto a single balance transfer credit card will remove the inconvenience of making multiple monthly payments.
What happens if you transfer your credit card balance to a new credit card?
They may end up with more debt than when they started. After you transfer your balance to a new credit card, you suddenly have more credit available.
What is zero percent balance transfer?
Ultimately, a zero percent balance transfer makes sense if the majority of your debt can be paid off before the promotional period of the card ends, the new APR after the promotional period does not offset progress , and any balance transfer fees can be avoided or comfortably covered.
What credit score is required for 0% balance transfer?
This isn’t so much a disadvantage of balance transfer cards as it is a warning. The best 0% balance transfer offers go to those with credit scores near or above 700.
What happens if you don't pay off your credit card debt?
For many cards, the actually APR will vary depending on the applicant’s creditworthiness. Therefore, make sure to reduce the majority of debt while using the introductory APR rate. If you can’t pay your debt off in that time period, compare the new APR with the APR on the card you’re transferring your debt from. If the new rate is higher, it could cancel out any progress you have made on reducing your debt during the 0% introductory period.
What happens when you transfer a balance?
With a balance transfer, your total credit increases by the amount of credit on the new balance transfer card. Assuming you don’t incur any more debt, your utilization rate will go down. While this is not a justification by itself to transfer a balance, It is a potential long-term benefit. You can read the Forbes list of ...
How much does a credit card charge for balance transfer?
The fee is expressed as a percentage of the amount transferred. Three percent is the most common, but fees range from as little as 0% to as much as 5% or more.
What is balance transfer credit card?
A balance transfer credit card can be a useful tool to have in your arsenal if you’re looking for a new hack to pay off debt faster. If you get approved for a low interest rate and pay off your debt during the promotional period, you may be able to save money on interest and be debt-free sooner.
What is balance transfer?
A balance transfer is the process of transferring debt from one credit card to another credit card, usually to one with a lower interest rate. This can be a great option, but if you’re not careful or aware of the potential drawbacks, you could wind up with even more debt. If you’re considering a balance transfer as part ...
How long does a balance transfer card have intro APR?
The promotional period can vary depending on the card, but you’ll see balance transfer cards out there with intro APR periods of anywhere from six months to 21 months.
What is the biggest mistake you make with balance transfer cards?
News & World Report. “One of the biggest mistakes consumers make with balance transfer cards is to use them for new purchases. You can end up in even more debt this way.”.
What happens if you don't have a credit card plan?
If you don’t have a plan, you may end up racking up even more debt with the new credit card. Worse yet, you may not pay off your existing debt within the promotional period and end up just shuffling your debt around without actually saving money.
How much does a balance transfer cost?
Many balance transfer credit cards will charge a balance transfer fee of 3% to 5% of the amount you transfer, usually with a minimum of $5 to $10.
Is a balance transfer good for debt?
In a Nutshell. A balance transfer can be a great way to save money on interest and get out of debt. But it can also be a slippery slope into more debt if you’re not careful. Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions.
Why do people take advantage of credit card balance transfer?
4. As a way to get out of debt faster. Getting out of debt quicker is one of the most common reasons people take advantage of credit card balance transfer.
Why do people use balance transfer?
There are several benefits to a balance transfer credit card. 1. Take advantage of a lower interest rate.
What does it mean when you forget your credit card password?
Forgot Password? A balance transfer means moving all or part of the debt from one or more credit cards to another credit card. Consumers often use credit balance transfer as a way to take advantage of a much lower interest rate.
How long does a balance transfer last?
Some balance transfer rates may only be in effect for two or three months, before reverting to a higher fee for the remaining balance. Special promotional balance transfer rates almost always expire. Don’t be afraid to ask questions.
Is there a one size fits all balance transfer?
There’s really no one size fits all when it comes to balance transfer credit cards. It really depends on your individual needs and goals. A card with low or no fees is always a plus. For example, if you’re looking for a credit card with a low balance transfer rate* with no annual fees, no balance transfer fees, ...
Why do you transfer balances?
One of the best reasons to transfer balances is to take advantage of a lower interest rate offered by another lender.
How long does it take to transfer a credit card balance?
A balance transfer isn't as quick as making a credit card purchase. It could take a few days to several weeks for the transfer to process. Continue making regular monthly payments on your old credit card until your online account statement shows a zero balance, indicating that the transfer has officially occurred.
How long does it take for a balance transfer fee to kick in?
This fee is usually added to your balance automatically when you transfer it, so the lower, the better. Some lenders won't charge the fee until after 60 days or so, but it often kicks in immediately and is added to your owed balance.
How to save money on interest charges?
You'll save the most money on interest charges by paying the full balance during the promotional period . Divide the total balance by the number of months in the promotional period to figure out the monthly payment you need to make to pay off the balance and completely avoid any interest.
Can you pay off high interest debt with balance transfers?
Balance transfers can be a great way to pay off high-interest debt, especially if you qualify for a promotional interest rate. But make sure you understand how balance transfers work before you apply. There are usually fees and some common pitfalls as well as advantages.
Do all credit cards require a balance transfer fee?
Virtually all cards require that you pay a balance transfer fee, and most offer promotional periods, and these can be fairly similar. But you'll want to look beyond these factors.
Lower Interest
Transferring your balance to a new card has one major benefit- you can reduce the interest rate on that balance. Many cards are geared for balance transfers and give you a long grace period with no interest for a set period- often 18 months. Seek out these 0% interest credit cards to transfer credit card balances.
Rate Spikes
One thing to be aware of is that on balance transfer cards, the interest rate often gets pretty high once the grace period ends. Those 0% interest credit cards can wind up with an APR of 20 percent or more after the introductory rate expires. If you haven’t paid off the balance by then, you will face some pretty big interest charges.
Fees
The other major issue with balance transfer cards is that they often charge a fee to make the balance transfer transaction. This fee could be a flat fee, or it could be a percentage of the balance that you want to transfer. If it is the latter, than the fee could be a significant amount of money.
Finding Cards
If the transfer is still a good idea compared to loan consolidation even with all the fees, then you need to find a good card. The best card for you will depend on your personal circumstances. Look for cards with low balance transfer fees and long grace periods where there is no interest on a transferred balance.
What is a credit card balance transfer?
Credit card balance transfers are typically used by consumers who want to move the amount they owe to a credit card with a significantly lower promotional interest rate and better benefits , such as a rewards program to earn cash back or points for everyday spending.
What does it mean to transfer a balance?
The challenge: Transferring a balance means carrying a monthly balance, and carrying a monthly balance (even one with a 0% interest rate) still involves making on-time payments of at least the minimum due on the transfer and for any new purchases. Otherwise you could end up losing the credit card’s introductory APR on your transferred balances ...
What is a check out from a credit card company?
The cardholder makes the check out to the card company they want to pay. Some credit card companies will let the cardholder make the check out to themselves, but make sure this will not be considered a cash advance.
How long does a balance transfer last?
Balance transfer credit card offers typically come with an interest-free introductory period of six to 18 months, though some are longer.
How long does a credit card have to pay interest?
During that period (by law, at least 21 days but more often its 25 days) a cardholder doesn't have to pay interest on new purchases. But the grace period only applies if a cardholder is carrying no balance on the card.
Can a balance transfer affect the grace period?
What many consumers don’t realize is that carrying a balance from a promotional balance transfer can affect the grace period if minimum payments aren't made each month. With no grace period, purchases on the new card after completing the balance transfer rack up interest charges.
How balance transfers work
The idea behind a balance transfer is simple -- move one or more high interest balances onto a new card with a lower annual percentage rate, often offered as a promotion. Many of the best balance transfer credit cards offer low introductory APRs, which let you pay down your balance while accruing less interest.
Is a balance transfer a good idea?
A balance transfer can be an excellent way to tackle credit card debt, especially if you can commit to paying off the debt within an introductory period.
How to initiate a balance transfer
If you think a balance transfer card can help your finances, here's how to get started.
What to look for in a balance transfer card
A balance transfer card is only helpful if it can help you save on interest or fees. Here's what to look for when searching for one.
What happens if I still have a balance after the introductory APR period expires?
While we encourage you to try to pay off your entire balance before the introductory APR period ends, sometimes that's not always possible. If you can pay off the balance in a few months, that's generally your best course of action.
Alternatives to balance transfers
If you have credit card debt of $10,000 or more, a personal debt consolidation loan may be worth considering. Like credit cards, these loans are unsecured, and although their interest rates are more than the 0% introductory offer on many credit cards, their regular rates are often much lower than the standard APR on credit cards.
How do credit card companies make money?
Credit card companies make money not only from interest but also from merchant swipe fees, called interchange when purchases are made . Consumers who opt for a 0% transfer should understand that the interest-free period is only for a limited time.
Do credit cards charge annual fees?
Luckily, a majority of balance transfer cards do not charge annual fees.
