Transferring credit card balance is the process where outstanding debt at exorbitant rates in one or more credit cards is moved to another card that offers a comparatively lower interest rate, this helps to pay off debt quickly.
Here are some benefits you get with a balance transfer credit card:
- Combine multiple credit card balances into one and make a single payment every month; you don’t have to worry about the late payment fees for different cards
- With a card that charges minimal fees or interest, you can pay off debt quickly.
- Helps to improve credit score through regular payments.
How Does Credit Card Balance Transfer Work
You can apply for a balance transfer when you make an application for a new credit card; you’ll have to wait for the transfer’s approval.
Estimate the amount to be transferred, even though the final decision rests on the issuer, either the full amount will be permitted for transfer or only a part of it, this depends on the issuer’s transfer limit or your credit limit.
Once the balance transfer takes place, you’ll start payments on your new card.
A bank will not perform a balance transfer between two cards issued by it, because the credit card debt is moving from a high-interest card to a low-interest one, the bank’s purpose is to find a new customer and credit card debt, and not allowing customers to avoid interest.
Apart from credit card balances, you can transfer high-cost loans on furniture, cars, and appliances to a no-interest balance transfer credit card.
There is no fixed limit for a balance transfer, it varies between issuers and credit cards, but there are several factors to be considered – credit limit of the new card, available credit on that card, restrictions that the issuer has regarding balance transfer, and your creditworthiness; if you have excellent repayment records, there is a higher chance your request for a balance transfer will be approved.
Credit Card Balance Transfer Charges
Most issuers charge a processing fee ranging between 3 to 5
percent of the amount, this fee is added to the total balance, but some banks charge a flat fixed rate processing fee.
Since the purpose of a balance transfer is to ease the financial burden, some issuers offer a no-interest payment option for a few months on the transferred balance. When this initial period ends, you’ll be charged interest, make sure to pay off a significant amount of debt during this period.
The interest rate of the card, (charged after the promotional period ends), known as the go-to rate is essential, it might even be more than the interest rate being paid now, and aim to pay off the debt during the introductory time; otherwise, you’re just accumulating interest and adding to your debt.
Best Five Balance Transfer Credit Cards
- Citi Double Cash Card – No annual fees / 0% Intro APR of 18 months / Balance transfer fee 5%, minimum 3%.
- Citi Simplicity Card – No annual fees / 0% Intro APR for 21 months / Balance transfer fee 5%.
- U.S. Bank Platinum Visa Card – No annual fees / 0% Intro APR for first 20 billing cycles / Balance transfer fee 3%
- Chase Slate Card – No annual fees / 0% Intro APR for 15 months / Balance transfer fee 5%
- HSBC Gold MasterCard – No annual fees / 0% Intro APR for 18 months / Balance transfer fee 4%
The credit rating required for the approval of balance transfer credit cards range from good to excellent, keep this in mind when applying for one.