All credit cards come with a financial obligation to repay the outstanding balance by the due date. Failing to do so can result in high-interest charges and late fees. The credit card balance transfer feature is a boon for all credit card users. Cardholders can transfer the outstanding balance from one credit card to another. Transferring the unpaid balance to another card helps users avoid high-interest charges and late payment fees. Usually, the balance is transferred to a card with zero or low APR. Many credit card issuers waive the balance transfer fees to entice users. Typically, the balance transfer fee can be in the range of 3% to 5% of the amount being transferred. Read on the learn more about the benefits of balance transfer credit cards.
What are balance transfer credit cards?
A balance transfer credit card is a card that allows users to transfer their existing due from a different credit card account. Most balance transfer cards have a lucrative interest rate to promote the transferring of balance from another credit card. A zero APR is typical among these credit cards. However, the interest-free period is limited to the first 12 to 21 months. This duration can vary depending on the policies of the credit card company. Usually, the interest rate for credit cards is over 18%. A zero APR balance transfer card can save a significant amount of money on account of interest charges.
Why should you opt for a balance transfer?
Many new credit card users are unaware of all the terms and conditions associated with using a card. As a result, they often do high-value transactions using credit cards, which leads to a debt pile. A balance transfer credit card can be a boon in these situations. There are numerous benefits of transferring a credit card balance. Here are some of the most prominent ones that users need to know.
A lower interest rate
Transferring the unpaid balance from a high-interest rate credit card to a lower or zero interest rate card is a no brainer. It can save a considerable sum for most credit card users. You can conveniently repay the debt in small amounts over the interest-free period, usually over three months for most balance transfer credit cards. A lower interest rate is among the best benefits of the balance transfer cards. You don’t have to worry about the financial penalties too. However, it is essential to have a concrete plan for repaying the outstanding debt within an interest-free duration.
Debt consolidation can be simply explained as the process of refinancing existing debts. The debt consolidation process entails taking one big loan to cover and repay all existing debts. It is a prudent way to address high consumer debts and improve credit scores. A credit card balance transfer can also be used as a debt consolidation method by transferring the outstanding amount from multiple credit cards to a single card. It also helps to simplify things as users only need to focus on one credit card bill/statement for repayment. Transferring balance from multiple high-interest cards to a zero-interest rate card can help you get back on track.
Get a credit card with better terms
Choosing the right credit card can help users avail of the best rewards and discount offers. You can select a credit card with better terms and benefits while doing a balance transfer from existing credit cards. In addition to better interest rates, users can quickly improve other terms like the grace period, late fees, reward points, discount offers, etc. Therefore, one should be mindful of all the new credit card features.
Maintain a good credit score
Balance transfer from a high-interest rate credit card to a low one can improve your credit score. You will have to pay little to no interest on the balance transferred. This will help to reduce your financial burden to a great extent. With a pragmatic repayment plan, users can easily get rid of the existing debt since they don’t have to worry about the compounding interest burden. In addition, repaying bills timely will reflect positively on the credit report and improve the credit score.
Improves eligibility for better credits
A balance transfer credit card can help users improve their credit score by timely repayment of the outstanding balance. This will allow users to improve their eligibility for better credits. One of the most critical determinants of credibility is the credit utilisation ratio. Repaying the balance will reduce the utilisation ratio, which will open new credit prospects for users. Also, improving credit scores will help them get loans at better terms. This is one of the underrated benefits of a credit card balance transfer.
Choosing the best credit card for benefits requires comparing the features and terms of different cards. There are numerous benefits of transferring a credit card balance. However, users must have a repayment plan in place to make the most of the balance transfer credit cards.
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