Tips for Saving on Balance Transfer Credit Card Interest
Credit cards not only save you bucks in terms of cashback, discounted deals, and free reward points. But they can also help you manage your debt and reduce financial stress when you are carrying a balance on your high-interest credit card. When you carry a balance on your card that has high-interest rate, the monthly payments may cost you more money towards interest. This is where the transferring balance of a credit card to a new card with a relatively lower rate comes in handy.
What is Balance Transfer?
A balance transfer is when you transfer balance of a credit card onto another card that comes with a lower interest rate or 0% promotion period. It helps you reduce the amount you own and save bucks by not paying a high-interest rate towards monthly payments. When you do so, you just need to pay off the balance of a single card you have transferred the balance to.
Since some balance transfer credit cards offer a 0% APR introductory period, they may charge a fee for balance transfer transactions. To help you avoid any hidden financial charges or fees, below we have listed some balance transfer tips so you can save on credit card interest instead of building more debt.
Get a Card with a Long Promotional Period
Some credit cards come with an introductory APR of 12 months or more from the time you activate your card for transactions. Some cards also offer 13 to 20 months of 0% APR period. When you are looking for a credit card to perform a balance transfer, you should look for a card with a long promotional period. This will provide you more time to save bucks on interest and pay off credit card debt easily without facing financial stress.
Check and Understand Interest Rates Carefully
Usually, balance transfer credit cards offer a specific interest rate on balance transfer and other transactions like purchases or payments are charged with different rates. Therefore, before you get a card, make sure to check and understand interest rates carefully so you can avoid higher interest rates on transactions you perform via your card. Reading the fine print prudently will give you an idea about how you will be charged by the issuer and what you can do to avoid additional fees.
Know the “go-to” Rate
Go-to rate is a standard rate applied on the card when there is an unpaid balance once the promotional period expires. Knowing the go-to rate is important to determine how much you will be paying after the expiry of the promotional period. This will keep you prepared for the interest rate that you will be charged based on the communicated go-to rate by the card issuer.
The Balance Transfer Fee
Balance transfer credit cards usually charge between 2 to 5 percent of the transferred balance. For instance, you might be charged $100 to $250 on a balance transfer of $5000. Before you move your credit card debt to another one, include the balance transfer fee in the estimate to check whether you will be saving bucks on the balance payment or not. If the interest rate is lower but the balance transfer fee is higher, you should look for another card with better terms and lower fees to save money on credit card debt payments.
Stay on Top of Monthly Payments
A balance transfer transaction may take 15 days or more if you are moving the balance to a new card. Balance transfer on an old card may also take up to 5 business days. This is the reason, you need to make sure you are not missing out on a single monthly payment during the transfer process. And if the debt moved to a new card after you have made a monthly payment, check the numbers carefully and only pay the balance you have transferred.
Maintain Good Credit Score
Consumers with a higher credit score are more likely to get the low promotional rates on balance transfer transactions. This also shows your ability to pay off the balance dutifully. So, try to maintain good credit scores by making on-time monthly payments and developing strong spending habits. You should also keep checking your credit reports for possible mistakes and errors to get them fixed immediately.