All you need to know about Credit Card balance Transfer!
Is it difficult for you to manage your multiple credit card bills?
Are you forgetting the due dates of your multiple payments, and feel like having only one payment against all your credit cards?
If you're in this situation, then you can decide to consolidate your credit card bills. The best option you have in hand is Credit Card Balance Transfer.
Go through this article to know how to consolidate credit card debt with balance transfer method. Also, listed here are the Do’s and Don'ts of Credit Card balance Transfer.
It’s advised, that you thoroughly understand them, before initiating a balance transfer.
How to consolidate debt with balance transfer method:
Balance transfer method is probably the best way to consolidate your credit card debt.
In this method, you transfer your high interest credit card debts to a card with a relatively lower rate of interest.
However, you may need your creditors' approval to opt for balance transfer to consolidate your credit card bills and pay them off.
By doing so, you can pay off the outstanding balance on your credit card at a comparatively lower interest rate.
Moreover, you can repay all your credit cards just by making a single payment every month. But you will have to take out a new balance transfer card.
The credit card companies offer such cards with an introductory offer of a low interest rate. You should try to repay the entire balance, which you will transfer to this card, within the introductory period of low rate interest.
Advantages of consolidating credit card debt with balance transfer:
The advantages of balance transfer method are given below:
- You can repay debts at a lowered interest rate
- Pay off your multiple bills through single monthly payments
- You can manage your finances better
- Your credit score may improve after paying off the entire balance
Do's and don'ts of credit card balance transfer:
While trying to consolidate credit card debt through a balance transfer, you need to review its do's and don'ts.
- Check the introductory period - It is very important to check the introductory low interest rate period, if you're taking out a balance transfer card for the purpose of consolidation. This is because, you may have to pay off the remaining balance at a significantly higher interest rate, once the introductory period is over.
- Plan a budget to save more - It is quite important that you plan a suitable budget and try to save more every month. You can use this money towards paying off your outstanding credit card balance. The faster you pay the balance amount, the more you'll be able to save money.
- Compare offers - Before signing up for a particular 0% balance transfer card, you need to compare different card offers. The terms and conditions vary according to the companies. Some credit card companies may offer a longer 0% introductory rate period. The transfer fees, and interest rate after the 0% period will also vary. Thus, it is wise to shop around for such offers.
- Check credit score - Before applying for a balance transfer, it is better to check your credit score. If you have a low credit score, your application for the 0% balance transfer card may get rejected.
- Read the fine print - Before getting the new 0% balance transfer card, read the fine print carefully. Check by how much may the interest rate increase after the 0% period. In addition check the transfer fees. If needed, talk to the card company for explanations.
- Pay the balance transfer fee – You will be charged a balance transfer fee, which you are supposed to pay. This will vary from company to company.
- Spend lavishly - Don't start spending lavishly after opting for balance transfer method. It is advisable to not use your credit cards until you clear your dues completely. Otherwise, you'll not be able to come out of the debt loop. And, most importantly, try to repay the outstanding balance as fast as you can.
- Close your old credit cards - After transferring your balance, you may decide to close some of your credit cards with high interest rates. However, before doing so, check out whether or not they are your oldest credit cards. Closing the oldest credit card will lower your credit history. In turn, this may lower your credit score too. This is because your credit history is one of the major factor involved in credit score calculation.
- Don't forget to revise the transfer - After transferring the balance from the old high interest cards to the 0% balance transfer card, check with the new creditor, and also the old ones, whether or not the money has been transferred properly.
- Don’t transfer online - Some credit card companies offer you to transfer the balance online, when you apply online for balance transfer card. However, you should avoid doing so. It should be avoided because you won’t come to know about the long term interest rate that will be charged after the balance transfer period. Moreover, the old credit card companies may not allow you to transfer the balance online.
- Don't miss payments - Once you get the 0% balance transfer card, try to maintain the on-time payments. If you fail to make the on-time payments, the bank can prematurely end the 0% introductory rate, and charge you a high interest. As a result, rather than paying down your debt, you are likely to incur more debt.
- Don't use it for purchases - Don't use the 0% balance transfer card to make any purchases. If you use this card to make purchases, the creditor can charge a high interest on the card. Thus, you will be incurring a huge amount of debt.
Also, check out the pros and cons of opting for balance transfer method to solve your credit card debt problems.
Other methods to consolidate credit card debt:
- Consolidation program - If you enroll in a consolidation program, you can repay your multiple bills just by making an agreed upon single monthly payment to the consolidation company.
A representative of the company negotiates with your creditors to reduce the interest rates. He/she also disburses the monthly payment, which you make, to your creditors as per agreement.
- Consolidation loan - A consolidation loan is like taking out a personal loan with which you pay off your existing credit card bills.
Thus, here also, you substitute your multiple payments with a single payment every month. You make this single payment to repay your new consolidation loan.
Once you're successful in paying back your entire credit card balance, use the credit cards responsibly. It will help you improve your credit score and enjoy a better lifestyle.
For more queries or discussion, please participate in our forum, and post the question or suggestion you have!