What Is A Balance Transfer?
Every time a credit card is marketed to you the phrase 'balance transfer' is always prominent. But what exactly is a balance transfer?
Simply put a balance transfer is when you move your owed balance from one credit card to another. Many credit cards offer this as a way of consolidating your debt at their institution.
But why would you ever really need to do that?
Many people owe a balance on more than one credit card at a time. For some this works out fine but for others this can be difficult to manage. Missed payments, varying fees - it can get expensive. Instead of paying varying interest and fees on 4 different balances you could consolidate them and pay one monthly payment and only have to deal with one interest rate and fee schedule.
There is always a catch to anything when it comes to credit cards! Most credit cards do charge a balance transfer fee when you initially consolidate. This fee varies greatly from card to card but is usually a percentage of the total amount you will be moving.
For some the fee won't be worth it but for others who are moving a balance from a card with a high interest rate to a card with a much lower one that fee ends up being worth it since they will be saving more with the lower interest rate.
Why Transfer A Balance?
Consolidating debt can make it easier to pay off in the long run and can help you avoid fees if you find yourself making late payments.
But what rate you get depends on your credit history and the bank offering the card. So if you are looking to consolidate your debt onto a lower interest card do your homework and shop around for the best rate that suits your needs and the balance you will be moving.