Balance transfer is the process of transferring high-interest debt from one or more credit cards to another card with a lower interest rate. This tactic will help apply more of your payments to the principal balance each month rather than interest charges, which can help you eliminate your card debt faster.
If your credit cards carry high interest rate balances, the monthly charges may be costing you some serious money. If that’s the case, transferring debt from one or more high-interest cards to a single card with a lower rate could make a lot of sense. It could effectively reduce the amount you owe and simplify your life with one statement and one payment due each month. While most banks charge a fee for balance transfers, in the long run the savings on interest from the lower rate card could be worth it. Before transferring your credit card balance to a new or existing credit card with a lower interest rate, know how balance transfers work and the questions you need to ask.
6 questions to ask to get the most out of a balance transfer:
Promotional or introductory new card rates often end 9 to 21 months after they start. To maximize your savings, determine how long the low rate lasts and how much you can pay off before it ends.
- What are the upfront fees?
When transferring a balance to a credit card, generally you pay a transaction fee of 3 – 5% of the transferred amount. However, the long-term savings from the lower promotional rate can outweigh the cost of this fee.
- What happens when the promotional rate expires?
Once the introductory or promotional rate ends, the contractual rate kicks in. Going from 0% to 15% in one month can be an unwelcome surprise if you’re not prepared. Read the fine print of the offer before you transfer.
In general, balance transfers have one APR, while other transactions- purchases, cash advances and fees incurred- have their own interest rates. Knowing all the APRs is useful when comparing offers.
Processing a balance transfer can take up to 30 days if requested as part of a new credit card application. Don’t fall behind on your payments to the old card. Once the debt is moved to the lower rate card, be careful not to incur more debt on the old card.
Even if you don’t qualify for a low promotional or lower contract APR, a balance transfer still can help. Combining debts can simply your life by giving you fewer bills to pay and fewer creditors to deal with. Applying for new credit card can impact your credit score.
The higher your credit score, the better your chances of receiving low promotional rate balance transfer offers. Improving your credit score starts with an understanding of what makes up your score and agencies that creates your credit report.
Dealing with debt can be tricky, but these six strategies can help you pay off credit card debt fast. Ready to get started transferring your credit card balance? Marine Federal has credit cards that offer low introductory APRs on qualifying balance transfers[. Do you have specific questions about the offer? Visit any branch location or call 910.577.7333 or 800.225.3967, Monday – Saturday, 8 a.m. – 6 p.m., ET.
The material provided on this website is for informational use only and is not intended for financial or investment advice. Marine Federal CU assumes no liability for any loss or damage resulting from this material. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.
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