How Credit Card Balance Transfers Work

Credit card companies offer credit card balance transfers in order to get business by offering a way to transfer the balance on your credit card to their brand of credit card. Additionally, they entice customers by offering a lower annual percentage rate.

Keep reading to learn more about what credit card transfer balances are and how they work.

Balance Transfer Fees

Despite the fact that you can get lower interest rates, this essentially cancels out because of balance transfer fees, which usually range from 2% to 5%. Depending on your credit score and the terms of the card, the amount of money you can transfer varies.

In order to make the most of a balance transfer program, make sure you calculate the total amount you will need to pay for the additional fee before you commit. You should only take advantage of it if the fee is offset by the savings you’ll get from long-term interest.

How a Balance Transfer Affects Your Credit

Although it can help you save money, a balance transfer may harm your credit score. This is because prospective lenders check your credit history when you apply for credit, which can impact your credit score. If you have many hard inquiries, this affect your trustworthiness with creditors.

Furthermore, your credit might take a hit if you close the original credit card account after the balance transfer. If you do this, it will impact your utilization ratio, which is the amount of credit you are using versus the amount that is available to you. You should consider keeping the original credit card open so your credit score isn’t affected.

How to Find Good Balance Transfer Credit Cards

If you have a good credit score, you will be able to qualify for the best offers. A good tip is to search for balance transfer credit cards that have lengthier promotional periods. You should try to find one that gives you enough time to pay off the balance at the introductory rate.

In order to find the best balance transfer credit card, you should find out your potential savings. Some banks offer tools that allow you to compare rates and fees to others. Be sure to take into account the balance transfer fee, annual fees, and the interest rate.

Furthermore, the best balance transfer credit cards offer a promotional rate that’s extended to cash back rewards, travel rewards, airline miles, and more.

How to Do a Credit Card Balance Transfer

Credit card balance transfers occur by using forms or special checks. Furthermore, it might be done directly by the issuer. The steps on how to do it depend on your bank, but here are the basics:

1. Make sure you know your bank account number and the amount you want to transfer
2. Let the bank know this information by using a paper form through the mail, over the phone, or through an online form.
3. Be patient while the balance transfer processes and keep up with your regular payments until the process is done. This process could take anywhere from 3 to 14 days, depending on how you initiated the transfer.

Author’s Verdict

If you are considering doing a balance transfer, make sure that you are able to pay for all the payments on time. Additionally, be sure that you are smart about the balance transfer credit card you choose.

In addition, we have a list of bank promotions to get some extra cash in your pockets today. You may also want to check out savings accounts if you want to get started on saving up money.

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