[ad_1]
Balance transfer cards are an effective way to help you pay off your debt, but they have pros and cons to be aware of. (iStock)
A balance transfer card gives you the option to transfer your outstanding debt from one credit card to another. Balance transfer credit cards are designed specifically for this purpose and typically offer a low introductory interest rate, helping you pay off your debt faster. Many people use them as a tool to consolidate their debts and save on interest.
To get one, simply apply using your name, address, social security number, income information, and the amount of debt you want to transfer. However, before you jump at the chance of getting approved, you should know that these cards have both strengths and weaknesses.
Advantages of bank transfer cards
low interest rates
In most cases, Balance Transfer Cards offer lower interest rates. The best balance transfer credit cards offer a 0% adoption rate. Moving your balance to a lower rate card allows you to use a larger percentage of your payment to pay off your balance. As a result, you can significantly reduce your debt.
debt consolidation
If you have multiple credit card debts, you can use a balance transfer card to combine all your debts into one monthly payment. Not only will the move eliminate the need to keep track of multiple payments and due dates, but it could result in fewer interest payments overall.
How FICO’s New Credit Score Changes Affect You
Declining utilization
Credit Utilization Rate is the amount of credit you are currently using on all your cards compared to the total amount of credit available. In general, the lower this percentage, the higher your credit score. When you open a balance transfer card, your credit total increases and your utilization decreases.
Cons of balance transfer cards
Balance transfer fee
Most credit cards charge a fee for balance transfers. Usually a percentage of the amount transferred. Paying up to 5% is common, but some credit cards have no balance transfer fees. Please check the applicable fee ranges before opening a new card.
higher interest rates
At the end of the trial interest rate period, the card’s regular interest rate will apply. This could be higher than the interest rate you are currently paying. Do your best to pay off your debt before the trial rate period ends. Anyway, before making the switch, make sure you’re fully aware of the comparison between your card’s normal interest rate (also known as APR) and your current interest rate.
Impact on score
Every new credit card you open has a negative impact on your score in the short term, especially if you apply for multiple cards at once. Be aware of the implications of your new application and keep that in mind as you create your application.
potential increase in debt
Finally, opening a new credit card gives you the opportunity to create even more debt. Pay close attention to your spending habits so you can pay off debt instead of creating new balances.
How to cancel a credit card without dropping your score
Balance transfer credit card alternatives
unsecured personal loans
If you don’t like the idea of applying for a new card, consider a personal loan instead. Personal loan approvals are based on income and credit history. However, because these loans are unsecured, they are not tied to any assets that you can get back if you stop paying, so interest rates are usually higher.
summary loan
A secured loan, on the other hand, is tied to an asset such as a house or car. These loans typically offer higher interest rates than personal loans, but be aware that you’re putting your assets at risk if you decide to stop making payments.
[ad_2]
Source link
