CardRates.com Guide: Balance Transfers
If you have a balance on one or more credit cards with high interest, you may start to feel like you’re throwing away money with all of your high interest payments. As your balance increases, so does the amount of interest you pay. This can make it difficult to ever fully pay off your increasing balance.
If it’s starting to feel overwhelming, you may want to transfer your balance to a credit card with a lower interest rate. With less interest accumulating on your debt, makes it easier to pay down your balance.
Transferring a balance from multiple credit cards to one new credit card also helps consolidate debt and makes payments more manageable. Many credit cards offer introductory 0% APRs on balance transfers of a year or longer, giving you ample time to pay off your debt without accruing more interest. While you still have monthly payments, it will all go toward the principal balance — not new interest.
Once that period is over, the regular interest rate will kick in. Pay attention to make sure the interest rate is not higher than the one you are currently paying. Note that if your balance is on a rewards card, this may mean giving up a rewards program. Why? Interest rates are notoriously higher on rewards programs since they cost more for the credit card companies. You will likely need a no-frills card without rewards to get the best balance transfer APR.
If you’re ready to transfer your balance, here’s how to get started:
Look for a card with a long introductory offer of 0% APR on balance transfers. Read the fine print so you understand what the regular APR will be after the introductory period and what the balance transfer fee is (it’s usually a percentage of the balance.)
Fill out the application
If you are denied, you will need to apply for another card. Do not apply to multiple cards at once, as you only need one and do not want multiple hard inquiries on your credit report if you can avoid it since this can harm your credit.
Submit the transfer and be patient
Some issuers let you do this online. Others may require you to call. It takes time for the balance transfer to complete. In the meantime, don’t forget to keep making the minimum payments on the old card as long as that account is still active. Failing to pay can result in fees depending on the card. Once you receive the final statement from the old issuer, you are done with the old card.
Photo source: wisebread.com
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