What is a balance transfer?
A balance transfer is a process where you take the balance on one credit card and move it to another credit card. Ideally, the interest rate on the new credit card will be significantly lower than your original credit card.
What you should know about balance transfers?
1). You may be able to get out of debt faster
With a credit card balance transfer, you may be able to pay off your credit card balance faster. Thats because you will potentially be paying less in interest. By being able to pay off the balance quicker, you may be able to get out of debt at a fast rate.
If you find yourself with lots of debt, then you should make paying off your high interest rate credit cards a priority.
2). You may need healthy credit in order to qualify
Low interest credit cards are not available for everyone. Typically, you will need a good credit score rating in order to qualify. At the very least, you will want to have a credit score average of at least 700 from the three major credit reporting agencies.
If you have excellent credit scores (an average above) 750, then you should be able to easily qualify for a low interest rate credit card. To learn how to get free credit scores, click here.
3). You should still keep your high interest rate credit card open
After you move your balance to the lower interest rate credit card, it is important to keep your old credit card open. Thats because the age of your credit is a major factor in calculating your credit score. Credit cards that have been open for four years or more will have an excellent positive impact on your credit score.
4). You may have to pay a balance transfer fee
There are some cases where you will have to pay a balance transfer fee. A balance transfer fee will typically be a percentage of the balance that you are transferring. This percentage rate will usually range from 3% to 5%. Be sure that the interest rate - on the new card - is significantly lower than your original credit card in order to realize any savings.
5). The low interest rate will not last forever
The lower interest rates offered on your new credit card will most likely be an introductory rate. That means that the low interest rate will not last. Usually, you will be able to enjoy that low interest rate for about a year. Therefore, you should have a plan to pay off the debt right after you transfer your balance to the new card.
Is a balance transfer in your future?
A balance transfer can be a smart way to get lower interest rates on your outstanding credit card balance. Remember to factor in the balance transfer fee when calculating your savings. Finally, be sure to look at a number of credit card offers before making your final decision. Check out other free debt advice and information here.
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