Balance TransfersFinancial Dictionary -> Banking -> Balance Transfers
Application for Balance Transfer Is Easy
In an attempt to attract new customers, many credit card companies offer free balance transfers. Once your money is owned by the new issuer, you will be provided a grace period during which you are charged less on your balance.
Carrying out a credit card balance transfer is not difficult. You have to just call a major credit card company and request information on its requirements. One point to keep in mind is that a credit score of 680+ will allow you to negotiate a 0 percent APY or 0 percent balance transfer fee. Normally, to complete the transfer, creditors may charge a fee of up to 5 percent of the balance on your card. It is possible to find cards with one, two, or even 0 percent interest and in some cases, the introductory rate is valid for a period of 6 months to 1 year.
You have to give the new company all required information, such as the account number of your old credit card, and specify the amount you wish to transfer. After your application has been processed and authorization given, you will have the balance transferred to the new account.
It is important to review and check the credit card statement, making sure the correct amount was transferred.
Balance Transfer Helps Eliminate Debt
It is considered that balance transfer is among the best means to reduce one's credit card debt; hence, this process serves as a way of saving money, with monthly payments being reduced.
In a way, you pay off the balance of the old credit card account (the higher interest rate one) from your new account and at a lower rate.
Research before You Transfer
The balance transfer sounds like a great idea in terms of personal finances. However, it is wise to do a good amount of research on your new credit account (e.g. the required transfer fee charges, APR, grace period, annual fees if any, and other important details).
Credit card companies have customer service representatives available to answer your queries. You may want to ask, for example, if the introductory rate applies to new purchases; then, what happens when the introductory rate on your new card expires. Find out what is the minimum amount to transfer, if there is a joining fee, etc. You need this information or else, a balance transfer of several thousand dollars may cost you a couple of hundred bucks.
Don't Be a "Defaulter"
While the balance transfer is supposed to work to your benefit, be wary to not get named a defaulter. You qualify for the title if you cannot pay back for a purchase on the date it is due.
In case that happens, your credit score (the meter of your financial trustworthiness) will be marred. A compromised credit score does not work to your advantage because you won't qualify for low interest loans and lucrative loan packages in the future. In case of medical emergency, you might have to resort to payday loans and other means of financing that come with ridiculous interest rates.
Last but not least, your social security number will be connected to the credit card account, and you may find it difficult to get a new job.