Balance Transfers: A Smart Way to Pay Down Debt

What is a Credit Card Balance Transfer?

A credit card balance transfer is moving your balance from a high-interest card to a new card with a lower interest rate or temporary 0%. This can save you money on interest charges, which can free up more of your budget for other things.

How Does a Balance Transfer Work?

When you apply for a balance transfer credit card, the issuer will review your credit history and income to determine if you qualify. If you're approved, the issuer will typically send you a check or direct deposit a certain amount of money to your account.

You can then use this money to pay off the balance on your high-interest credit card or cards. Once the balance is transferred, the issuer will charge you a balance transfer fee, which is typically around 3%, and begin charging interest on the transferred balance. The interest rate on a balance transfer credit card is typically lower than the interest rate on your existing credit card, so you can save money on interest charges over time.

Is a Balance Transfer Right for Me?

A balance transfer can be a good option if you have a high-interest balance on your credit card and you're able to qualify for a lower interest rate. However, there are some things to keep in mind before you apply for a balance transfer credit card.

• Balance transfer fee. Issuers typically charge a balance transfer fee of around 3% of the amount you transfer, so you'll need to factor this into your decision.
• Higher interest rate. Once the promotional period ends, the interest rate on your balance transfer credit card will likely be higher than the rate on your old credit card. So be sure you're prepared to make higher payments once the promotional period ends, or your interest rate will soar.
• Credit score. Applying for a balance transfer credit card will result in a hard inquiry on your credit report, which can lower your credit score by a few points in the short term.

Overall, a balance transfer can be a good way to save money on interest charges and pay down your debt faster. However, it's important to weigh the pros and cons before you apply for a balance transfer credit card.

If you're thinking about a balance transfer, it's also important to compare different offers from different issuers. This will help you to find the best deal on a balance transfer credit card that meets your needs.