How Does Credit Card Balance Transfer Work?
At times, credit card users find themselves with pending card dues coupled with a compounding rate of interest. This could happen under circumstances like you had to pay for emergency medical expenses or other reasons. In such a scenario, you might find it challenging to pay off outstanding debts.
A smart way to deal with this situation is to carry out a credit card balance transfer to ease up the situation. It allows one to reduce financial stress and strengthen your financial management abilities.
What is a balance transfer card?
As the name implies, a balance transfer credit card is one that allows the user to transfer the balance from a high-interest card to a credit card offering economical interest rates.
The most significant benefit here is that you can clear all the outstanding dues at one go. Other benefits include reducing your expenditure towards the penalty charges and make only one low-cost payment each month.
However, not all credit cards allow such facilities; hence, pick one smartly that allows such benefits.
How does credit card balance transfer work?
Apart from offering a lower rate of interest, certain balance transfer credit cards offer other advantages as well. For instance, some come with a pre-determined 0% interest rate, while others charge marginal interest rates for a specific duration.
It is essential to note that carrying out balance transfer involves a marginal processing fee. Hence, before you carry out a credit card balance transfer – make sure how much you are saving on the whole.
Keep in mind, your savings must be more than the sum total of processing fees and additional costs involved in a transfer. It is advisable to perform a cost-benefit analysis in advance to gain absolute clarity.
A step-by-step guide to carry out credit card balance transfer
Follow these steps to carry out a balance transfer to your preferred issuer:
- Check your outstanding dues, rate of interest and penalty charges.
- Choose a credit card that offers a promotional rate of interest.
- Check if the credit limit is sufficient enough given your outstanding debt.
- Assess balance transfer fees and decide if the swap is worth it.
- Make a card application with the new provider.
- Request for a balance transfer and clear off your debt.
Following this guide on balance transfer credit cards will help you to transfer your balance to another card issuer and reduce the financial burden in the process.