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Key takeaways:
- A balance transfer card can help you save money while paying off your debt faster.
- However, it’s important to compare offers carefully and choose a balance transfer that’s right for you.
- We break down how to get the most out of balance transfer offers and what to look for.
You can think of balance transfers as a financial tool that allows you to consolidate debt or move balances around to get a better deal. The benefits include consolidating multiple credit card payments into a single payment and potentially securing a better interest rate.
When Does a Balance Transfer Make Sense?
If you’re dealing with high-interest credit cards or multiple balances, a balance transfer may help you save money, simplify your payments, and pay down debt more efficiently.1. Get No or Low Interest
When you have several credit cards or carry a high balance, interest charges can add up fast. Before you know it, your monthly payments are way up, and you’re barely making a dent into what you owe because so much goes toward interest.You can break this cycle with a balance transfer:
- Balance transfer offers sometimes have a 0% introductory interest rate for a set term, like 12 months.
- The interest rate goes up after this initial period. As long as it’s lower than what you’re paying now on your credit card, you can save money.
- A lower interest rate may lower your monthly payments, or give you some breathing room so you can pay off more of the balance and get out of debt faster.
2. Consolidate Your Debts
If you get approved for a balance transfer offer, you can use this new account to pay off multiple credit card balances.Instead of managing multiple due dates and minimum payments, everything is consolidated into one monthly payment.
It’s easier to budget that way, and you’re less likely to forget and miss a payment.
3. Get Out of Debt Faster
A balance transfer may help you get out of debt faster by reducing how much you spend on interest:- If you can get a 0% offer or at least lower your current interest rate, more of your payment goes toward the actual balance.
- Combining multiple balances into one payment can make your monthly budget easier to manage, helping you stay consistent and avoid missed payments.
To better understand how much you can save with a balance transfer, use this Debt Consolidation Calculator to see the difference in monthly payments.
How Do Balance Transfer Terms and Rates Work?
Before shopping around for a balance transfer offer, it’s important to understand how these offers typically work.
How Is a Balance Transfer Card Different From a Regular Credit Card?
A balance transfer card works like a regular credit card, but it includes a promotional offer specifically for moving existing debt. The key difference is the introductory low or 0% APR on transferred balances, which is designed to help you pay down debt faster. You can use a balance transfer credit card to finance new purchases, but you typically won’t get this introductory APR on new charges.
What’s an Introductory Rate?
Most balance transfer cards come with a 0% or low introductory APR. This offer lasts for a limited time, usually somewhere between six and 21 months. During this period, no (or very little) interest is added to your balance, which means your payments may be lower and more of them may go toward the principal. To make the most of this, pay off as much as possible during the introductory period.What Happens When the Introductory Rate Ends?
When the introductory period ends, a standard interest rate applies to the remaining balance you transferred. This rate is much closer to a typical credit card APR.How Do Transfer Windows Work?
In most cases, balance transfer cards have a transfer window. It means you have to transfer your balance to the new card within a time period, usually 60 to 120 days. If you miss this window, you won’t get the introductory APR.Do Balance Transfers Affect My Credit Score?
Yes, but it’s not a bad thing. Your score may dip because you’re opening a new account and closing the old ones. However, if you use a balance transfer offer to get out of debt, you may get a stronger score in the long term.
Do Balance Transfers Cost Money?
There is usually a fee for a balance transfer, which can range from 3 to 5% of the amount you’re transferring. You’re not paying it up front, and it gets added to the balance you owe. Make sure the interest you’re saving is enough to outweigh this fee.
Why Choose a Credit Union for a Balance Transfer?
Credit unions are often more flexible in approving balance transfers and can offer very competitive rates. In many cases, the standard rate you’ll get at the end of the introductory period can be better than what traditional banks offer.
Is There a Cap on How Much I Can Transfer?
Yes, the amount you can transfer is limited by your new card’s limit. Some card issuers also set an additional limit at 75% to 95% of this new credit line, including any transfer fees.
Can I Transfer a Balance From the Same Card Issuer?
In most cases, no. Most credit card issuers don’t let you move balances from one card to another. You’ll need to do a balance transfer with a different financial institution.
How Do I Transfer Multiple Balances?
Double-check that your balance transfer card allows you to transfer multiple balances. During the application or shortly after, you’ll have the possibility to list all the accounts you want to transfer a balance from.
Can I Consolidate Buy Now, Pay Later Debt With a Balance Transfer?
You can’t transfer the balance directly, but some card issuers let you get cash or convenience checks that you can use to pay off a Buy Now, Pay Later balance. You can also pay off your BNPL balance with a credit card and then add it to a balance transfer.What to Consider Before Applying for a Balance Transfer Credit Card
Before applying for a balance transfer, here are some important factors to consider.
| Payment schedule | Make sure you can keep up with the new payment due date and minimum payment. |
| Promotional APR | Find out how long the promotional APR period will last. Can you make extra payments to reduce your debt as much as possible during the introductory period? |
| Penalties and late fees | Ensure you are aware of the new card's late fees and penalties, and make sure you understand how they work. |
| Balance transfer fees | Balance transfer credit cards sometimes charge a fee. Make sure you know what the fee is and factor it into the decisions you make going forward. |
| Credit limit | You also need to make sure the new card's credit limit is high enough to accommodate your transferred balance as well as any new purchases you plan to make. |
| Interest rate | The new card's interest rate should be lower than your current card's interest rate to ensure that the transfer is worth it. If the new card offers a promotional zero APR period, make sure you know when it ends and what the new interest rate will be after that period. |
Balance Transfers With Power Financial Credit Union
At Power Financial Credit Union, our members can take advantage of the balance transfer promotions to help them get out of high-interest credit card debt.Power Financial Credit Union serves almost 35,000 members in the South Florida area. Our members have easy access to secure and convenient financial services via mobile banking, as well as banking access through our shared branching network.
Ready to get out of high-interest credit card debt? Contact us now to take advantage of our best balance transfer offer and start paying off your debt faster. Speak to one of our trusted advisers and see how our low introductory rates, cash back, and rewards program can benefit you.