Deep in debt and can't think straight?
Credit card interest rates can be unbelievably high. Many experienced users might make a mistake and get buried in debt. A hefty interest on a big fat amount can total up to a lot of money to be repaid. You might be at a loss, wondering how to manage your tough financial situation. A balance transfer might be an ideal solution for you.
If you have a huge loan or a heavy debt on a credit card that you can't afford to pay off, you could opt for a balance transfer facility. It allows you to transfer a high-interest credit card balance to a new credit card that has a lower interest rate. You might find a few balance transfer cards which offer 0% introductory APR for a limited period.
You can transfer your outstanding balance from multiple credit cards to a balance transfer card. It can streamline all your payments into a single payment, which is much easier to manage.
Read on to know how you can do a balance transfer in 6 steps.
Educate yourself on your own credit history before you opt for a balance transfer. Go through your credit balances and APRs. You must pick an appropriate card for balance transfer based on this information. It should have low or no balance transfer fees and the issuer must approve the amount you wish to transfer.
Once you have done the calculation, you need to find the right card. Options are aplenty. However, you might not be able to transfer your entire debt to a single balance transfer card. Also, you must find one with a low introductory APR. Most balance transfer cards initially offer 0% APR for a limited time. Don't forget to find out how much the fees would be after the introductory offer on APR is over.
Understanding the terms and conditions before buying the card is of paramount importance. A handful of these balance transfer cards have a balance transfer fee, usually within 3% to 5%. This fee is levied on each balance transfer.
For example, you already have an APR of 12%. The balance transfer card offers an APR of 10%. Over and above that, you have to pay a balance transfer fee of 4%. That doesn't look profitable at all. You won't save anything; on the contrary, you will pay more than before!
Also, check the following:
Credit limit or amount of balance that can be transferred.
Duration of the promotional offer of low APR.
Any restriction on specific types of card or card issuing company.
You can apply for a balance transfer card online. Fill up the form with necessary and correct information. Submit the application form and wait to receive a confirmation of approval.
It is better to approach the new credit card company and request a balance transfer. It is a simple process and can be done online or through a phone. Your new credit company will need to know how much of your balance you wish to transfer as well as the account numbers of your old cards. It typically takes seven to ten working days to process the transfer. Continue to make payments on your old cards till the new card company confirms a successful transfer.
Once the balance transfer is successful, all your old cards will be wiped clean and your entire debt will be transferred to your new card.
If you had a huge debt, transferring the entire amount might not be possible. In that scenario, you still need to make some payments on your old cards.
Try to pay off most of your balance within the introductory period when the APR is low. That's how you must utilize a balance transfer to your advantage - save money on interest and pay off debt faster.
A balance transfer can be convenient in paying off debt, but they can't do a miracle! It might be able to kill your existing debt, but if you aren't careful, the balance transfer card can stab you back.
You need to act responsibly, be committed and put in your best effort to get out of debt altogether. If you don't, you will end up in more debt. Check your credit report regularly to make sure that this does not happen.