Balance Transfer Credit Cards play a major role in helping you manage your credit, reduce interest charges and can help you reduce your credit card debt more quickly.
A balance transfer credit card allows you to transfer balances you owe on other credit cards to your new credit card that has the balance transfer feature.
Be careful to pay attention to the terms and conditions because different cards have different rules that apply to transfers. Also, the same credit card may have tiers that have different balance transfer rules.
A credit card with tiers is one that is available to people with a wide range of credit scores. Chase Bank uses the terms Elite, Premium and Standard. Discover Bank uses Excellent Credit, Average Credit, and Needs Improvement. Please note that tiers may apply to only specific cards like the Chase Platinum Visa® Card and the Discover® MoreSM Card.
You should also be aware that there are balance transfer fees that differ among credit cards. The overwhelming standard fee is 3%. Some credit cards put a cap on balance transfer fees. For instance, the Discover® MoreSM Card has a cap of $75 for cards issued to persons with excellent or average credit. The cap for the Needs Improvement tier is $99 (the fee is 4% for this tier).
Balance transfer fees for all tiers of the Chase Platinum Visa® Card are 3% with a $99 cap.
You should also be aware that there are introductory balance transfer offers at a lower interest rate. At the end of the introductory period, the interest rate rises to the basic rate on the card issued to you.
Before you decide which card is best for you, you should have a plan for how the transfer will benefit you. Let's say that you have a credit card on which you are paying 22.99% interest. That means your monthly payment should at least cover the new interest charge and 2% of your outstanding balance.
Now let's assume you qualify for one of those cards mentioned above and have a balance transfer introductory period of 12 months at 0% APR (interest). You have the opportunity to save that 22.99% you are paying on that old credit card, and you have 12 months to pay down the principal during the "no interest" phase of the new card.
If at all possible, you should continue paying what you were paying on the old card: 2% of your outstanding balance plus the amount of interest charged to you on the last statement you had from the old card issuer. This will help you pay down the principal so future interest charges will be much less than before, and it will allow you to recover the balance transfer fee you paid.
You can see the best balance transfer credit cards available on our Balance Transfer Credit Cards page.
|
