If you want to open a new credit card account, using balance transfers can help you attain a new credit card with lower interest rates. Balance transfers can make debt repayment easier, but if mismanaged, they could make your financial situation more complicated.
A balance transfer is the transfer of debt on one credit card to debt on another. You don't have to transfer your entire credit card balance. By moving your debt to a credit card with less interest or a more flexible payment plan, the total amount of money you spend repaying your debt can decrease dramatically.
When accounting for the financial impact of a transfer, note that many credit cards come with balance transfer fees to deter frequent movement of funds. The fees also allow banks to profit from the transaction.
Many credit card companies offer a 0 percent balance transfer, which means they won't apply any interest to your account when you make a transfer. This will last for a predetermined length of time, before interest rates kick in. If you have a very good credit history, 0 percent interest may last for the first 12 months of service, and cards with up to 24 months of 0 percent interest are also available.
When transferring your balance to a new card, the credit card company may collect a balance transfer fee. A balance transfer fee is the amount of money charged by your new credit card company for moving your balance over. This can be set amount or a percent of the transferred balance.
You can use online calculators to figure out the total cost of transferring your funds to a new creditor. Before selecting a credit card company, compare several different options. Read the service agreements thoroughly to ensure that the company upholds the advertised interest rates.
When you decide to transfer your balance to a new credit card, evaluate additional perks to help you decide which credit card is right for you. By selecting the best rewards credit card for your needs, you can save money on purchases you usually make.