Balance Transfer Credit Cards Explained
Balance transfers can be done from one credit card to another. This is an option available to credit card holders especially if they’re offered a new card with lower interest rates and better deals. Transferring balance from your old card may seem to make sense notably when one if troubled with rising credit card debt.
Many credit card companies offer free balance transfers to attract more consumers. Additionally, they will even provide a grace period where cardholders are charged with a lesser rate on their transferred balance. This is known as an introductory rate which ranges from zero to two percent interest and which may last from six months to one year.
This makes a good alternative to lower credit card debt as it gives the cardholder the freedom to pay his balance on a card without the additional interest charges. With this option, a person can avail of the opportunity to open a new credit card account after the old card expires. It’s advisable as well to close the old account immediately because these days, having more than two credit cards is not favorable for your
credit
scores.
A balance transfer involves three elements – offer rate, offer duration and transaction fee. In terms of rate and duration, there are three types – purchase rate, teaser rate and fixed life of loan rate, also called life of balance.
The purchase rate offer refers to the rate applied to your transferred balance which is the same rate as your card’s purchase rate.
The teaser rate offer pertains to a very low rate but for a limited time only. Perhaps, you’ve heard about the zero percent rate offered to a new credit card account. The teaser rates vary and may last from usually six months to more than a year. After that period, a purchase rate will already be applied to the remaining transferred balance.
Meanwhile, the fixed life of loan rate offer is a fixed low rate applied to your transferred balance until it is paid in full. As long as you keep your account current, you can avail of this offer.
Consider several factors before deciding to transfer your credit card balance to a new one.
Look into better credit card
management. Be sure to read carefully the fine print because sometimes, there are hidden charges that you may not be aware of.
Ask yourself as well some important questions such as those pertaining to the duration of the introductory rate, the yearly percentage rate after the teaser rate’s expiration, the annual fee if any, fees for late payment and going beyond the credit limit and fees for balance transfer. Some companies charge transaction fees for balance transfers up to four percent while some may waive fees for initial transfers only. Fees for initial balance transfer are applied when the customer accepts the card and accomplishes the balance transfer form.
In filling up the form, make sure that you provide complete information to avoid delay in the balance transfer. Once accomplished, the new credit card issuer will send you a notice on your successful balance transfer. You can verify this by calling your old card company.
In order to ensure that your old card has zero balance and is already cancelled, experts advise to wait until you get a billing statement verifying your zero balance. You can even request for it in case you don’t receive it. See
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