Balance Transfers

Today, every major credit card company offers balance transfers, and if you are offered a card that doesn’t offer a balance transfer, then you should think before applying for that card.  Before we discuss the good and the bad of balance transfers, the first question is, what is a balance transfer?  Balance transfers are a facility that allows a cardholder to use one card to pay the debt on another credit card.  For example, if I have a card in which I have a debt of around $3,000, I can use another card to pay off the rest of the balance on my first, assuming I have already started paying off the $3,000.

The next question is why should someone want to transfer a balance from one card to another card?  Well, there are different reasons; the most obvious reason could be that I am being offered a lower APR (interest rate) on my Amex card compared to the Discover card, or the Amex card might offer me a transfer with no APR and no extra cost.  Many card companies offer promotional periods where all purchases are given a low APR, or in most cases no APR.  This means if you buy something for $300 and agree to pay off the amount in installments for 6 months, chances are you will end up paying only $50 a month.  Compare this to a normal card where you will actually pay around $52.50 a month and end up paying $315 instead of $300 at the end of 6 months.  You want to get a card that offers a promo offer that will allow you to get balance transfers from cards that you are paying interest on, and then pay off the amount without any APR.

Balance Transfer - Apply Online

Chase Free Cash Rewards Visa Card Intro APR - 0% Intro Period - 12 Months Regular APR - 13.74% Annual Fee - $0  One From American Express Intro APR - N/A Intro Period - N/A Regular APR - 14.24% Annual Fee - First Year Free  Discover More (SM) Card - Top Cashback Offer Intro APR - 0% Intro Period - 6/12 Months* Regular APR - 10.99% Annual Fee - $0

You simply transfer your balance from your existing credit card to a card that offers you a lower interest rate.  Make sure there are no transfer charges.  It’s important to be aware of and carefully monitor the charges that are involved in transfers.  Credit card companies charge between 3-5% for balance transfers; although you can get a balance transfer free if your card is in its promo period.  Either way, you need to make sure you know that the balance transfer is free before you agree to the balance transfer.

Another mistake some cardholders make is assuming balance transfers will take place overnight; most balance transfers take 3-4 weeks.  Therefore, it is important to keep making the minimum payment to the existing card company until the balance transfer is complete, or you might end up paying some additional fines.

It’s also important before you carry out balance transfers to understand the APR of the credit card that you already have.  You may get a free balance transfer, but it is pointless if the current credit card is charging you an APR of 10% or higher.  For the transfer to actually be free, you need to include the charges that might indirectly be associated with the balance transfer.  It is only when you take into account the various charges like the balance transfer fee and APR of the newest card that you can actually call your balance transfer free.

Again, you need to remember balance transfers might take away the sting of paying the higher APR, but it doesn’t take away the fact that you still have to pay the credit card company the debt you owe them.  You need to work to eliminate your debt, and by saving on the debt you owe on one credit card; you should use that money to pay debt on other cards.  As a result, you will have paid off all your debts and you are truly debt free.