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 card balance transfers as a way to take advantage of a much lower interest rate. It’s important to realize that you are not actually paying off debt with a balance transfer, you are simply transferring it to another card. There are several benefits to transferring high-interest balances.
1. Take advantage of a lower interest rate.
Oftentimes, credit unions and other financial institutions will offer low-interest balance transfer specials. If you are currently carrying a high balance on a credit card with a high interest rate, this can be one of the biggest advantages of credit card balance transfer. It’s a great way to pay down your debt faster by lowering the total amount you are paying in interest. You can focus on tackling more of the debt balance each month. A word of caution when you are taking advantage of a balance transfer rate special, be sure to read the fine print to see when that special, low rate expires. Some balance transfer rates may only be in effect for two or three months, before reverting to a higher rate for the remaining balance. Special promotional balance transfer rates almost always expire. Don’t be afraid to ask questions. When does the promo rate expire, and when it does, what is the new rate? You will want to shop around to find the best overall deal, including rate, length of a special promotion, and terms. If the new card has a lower interest rate but exorbitant fees, then it’s not such a great offer, is it? Finally, the best rates are usually reserved for those with the best credit scores. Keep this in mind.
2. To consolidate debt from multiple credit cards.
If you find yourself overwhelmed with multiple monthly credit card payments, a credit card balance transfer will allow you to consolidate the balances of several credit cards onto one card. It’s a great way to simplify your finances. You will not only enjoy a lower interest rate (if you’ve done your homework), but you will also have one convenient monthly payment that may enable you to focus on paying off your debt more effectively. Something to note when you are looking to consolidate balances from several cards, make sure your new credit card has a high enough credit limit to handle all of your balance transfers. After all, if this is your goal, the point is consolidating it all, right?
3. To move to a credit card with better terms.
In addition to a higher interest rate, your current credit card or cards might have higher fees, a shorter grace period, and other terms that you just don’t like. Taking the time to find a credit card that truly fits your needs can pay off with better terms and other perks.
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 transfers. They look at that lower interest rate as giving them that extra savings they need to pay off credit card balances faster. One thing to be aware of when your goal is getting out of debt faster is that a balance transfer can put you at risk of getting into more debt. You need to avoid the temptation of charging up the balances of those credit cards you paid off with your balance transfer or it will defeat the purpose and get you deeper into debt.
5. To get a card that offers rewards and other perks.
This can be another great advantage of a balance transfer credit card. Getting a card that gives you cash back, travel rewards, or other perks or discounts can be a great benefit and offer you additional savings.
So, just what is the best balance transfer card? There’s really no one-size-fits-all. 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, no cash advance fees, and cash back rewards, Spirit Financial has a perfect offer right now. If a credit card balance transfer is on your to-do list, be sure to check it out. Applying for a balance transfer credit card is simple, you can do it right online.