A balance transfer can assist you to save money on interest charges from existing personal loans or credit cards. It can also reduce what you are paying in annual expenses and streamline your payments into a single monthly statement.
Most balance transfer credit cards allow you to move debt from existing store cards or credit cards. There are also a few that undertake personal loan debt. The balance transfer process is straightforward: when you apply for a balance transfer credit card, you should give details of the existing account and the sum of money you want to be transferred. Your new credit card vendor will move the balance to your new account if your application is approved.
Once the balance is transferred, you can pay it off at a low-interest rate or without having to pay any interest for a specific period. Any remaining debt from your balance draws a higher (standard) interest rate when the introductory period ends.
How To Find Best Balance Transfer Credit Card?
Look for the following aspects when searching for a balance transfer credit card that suits you best:
- Find A Low Rate. Most balance transfer credit cards provide zero per cent interest for a specific period. Usually, the lower the interest rate, the more you will save.
- Learn About Transfer Fee. Some cards ask for a balance transfer fee between 1 per cent and 3 per cent that might consume your potential savings.
- Look For Long Offer. The longer the promotional term, the more time you will have to pay off your debt for zero per cent or at a low-interest rate.
- Check The Eligibility. You can typically transfer a balance from Australian issued accounts or cards from a distinct issuer.
- Revert Rate. If you have not paid off the balance transfer within the promotional period, the higher revert rate of interest will be levied on your leftover debt.
Its Impact On Your Credit Score
A balance transfer does not necessarily impact the credit score. However, missing repayments will hurt your credit score. Therefore, you need to be sure to weigh up what is best for maintaining your credit health.
3 Tips For Making Most Of Your Balance Transfer
- Do Not Spend On New Card. This way, you would not add to your debt, and your repayments go towards your balance transfer.
- Try to pay off the entire balance within the stipulated time. This way, you can avoid a higher revert rate of interest. Using an auto-payment feature can help.
- You don’t need to transfer 100 per cent of your balance. However, if you divide your balance, ensure you can manage both cards.