Why You Might Need a Balance Transfer Credit Card
What Is a Balance Transfer Credit Card?
A balance transfer credit card allows users to move existing credit card debt to a new card, often with an introductory low or 0% interest rate. This type of card is sometimes used to manage interest payments and consolidate multiple balances into one.
How Balance Transfer Cards Work
When transferring a balance, the new card issuer pays off the previous credit card debt. The user then repays the amount under the new card’s terms, which may include a promotional period with lower interest rates.
Potential Features of Balance Transfer Cards
- Introductory 0% APR – Some cards provide a promotional period where no interest is charged on transferred balances.
- Balance Transfer Fee – Many cards charge a fee for transferring a balance, typically between 3% and 5% of the transferred amount.
- Standard APR After Promotional Period – Once the introductory period ends, the card’s regular interest rate applies.
- Credit Limit Considerations – The amount that can be transferred is usually limited by the credit line approved by the issuer.
Things to Consider Before Applying
- Length of the Introductory Period – Some cards offer longer 0% APR terms than others.
- Fees and Costs – Balance transfer fees and potential annual fees may affect overall savings.
- Credit Score Requirements – Issuers often have credit score requirements for approval.
- Regular APR – Checking the interest rate after the promotional period is important when choosing a card.
General Steps to Transfer a Balance
- Compare Offers – Reviewing different credit card options and their terms.
- Apply for a Balance Transfer Card – Completing an application with the selected issuer.
- Request the Transfer – If approved, the user can initiate the transfer through their new card issuer.
- Continue Payments Until Transfer is Complete – Some transfers take days or weeks to process.
- Make Payments on the New Card – Staying current on payments may help avoid penalties.
Balance transfer credit cards may be useful for those looking to manage existing debt in a different way. Reviewing terms, fees, and interest rates carefully can help in selecting the right option.
